VMWare shareholder payouts: Broadcom takeover will earn Michael Dell $21.6bn in cash if it goes ahead
By Jenny McCall
13:23, 3 November 2022
It’s an acquisition that has garnered as much attention as Microsoft’s (MSFT) takeover of Activision Blizzard (ATVI). Tech giant Broadcom (AVGO), is acquiring software company VMWare (VMW) for $61bn (£50bn) and it seems that Michael Dell, owner of Dell (DELL) technologies will receive a hefty pay-out once the deal is signed and sealed.
In a statement put out by VMware (VMW) in May, the group said under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, VMware shareholders can either elect to receive $142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware (VMW) share they have.
Since the takeover announcement, Broadcom's share price has been down 4% and VMW stock price has fallen by 7%.
Nevertheless, it seems that some people will profit heavily from the acquisition.
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Broadcom (AVGO) share price chart
Billionaire Dell will move up the rich list
According to a Securities and Exchange Commission (SEC) filing, if the deal goes ahead, CEO Michael Dell, who already has a net worth of $45bn, will become even richer and gain an additional $21.65bn.
Payday will be a great time for Michael Dell, he owns 169,278,015 million shares in VMware and following the close of the acquisition by Broadcom (AVGO) he will receive a nice sum for his investments.
The sum equates to one-third of the $61bn that Broadcom will pay for VMW and was disclosed in a regulatory filing last week with the SEC.
The filing also disclosed the amount of cash and Broadcom (AVGO) stock each member of VMW board of directors will receive. Most pay-outs are around $2.9m or under.
Michael Dell is the 24th richest person in the world and this additional money, which some might call light change in comparison to what he already has, will push him further up the billionaire's ladder.
According to Bloomberg Billionaires Index, this additional money would move Dell up the list, and he would sit just behind Mexico’s Carlos Slim at number 13.
American billionaire, philanthropist and the founder of Dell Technologies (DELL), purchased VMware Inc in 2015. Dell and Silver Lake, a private equity firm, own 40.2% and 10% of VMware shares outstanding, respectively.
Both parties signed support agreements to vote in favour of the transaction, but only if the VMware Board continues to recommend the proposed transaction with Broadcom.
Michael Dell, Chairman of the VMware Board, said: "Together with Broadcom (AVGO), VMware will be even better positioned to deliver valuable, innovative solutions to even more of the world's largest enterprises. This is a landmark moment for VMware and provides our shareholders and employees with the opportunity to participate in meaningful upside."
But despite the board approving the deal, regulators have not yet signed it off and it's far from complete.
AVGO wants to dodge phase 2 investigation
AVGO is seeking to dodge the phase two stage of the EU’s investigation and fast-track the deal, so that it can be approved – as quickly as possible.
According to sources close to the matter, the acquisition is moving along with other regulatory bodies around the world. Broadcom says the deal will create more competition in the cloud market, where there are very big players already and the chipmaker is hoping the antitrust approval in the EU will be sped up.
Broadcom names market competitors Amazon (AMZN), Microsoft (MSFT) and Google (GOOG) to its advantage, and states that the deal does not have to undergo a phase two regulatory approval. If the takeover did go to phase two, it would mean the European Commission (EC) would take at least four-months to investigate the acquisition.
Broadcom (AVGO), which is hoping it can shave at least four months of the timeline, will essentially argue that the takeover will boost competition in the market with other cloud giants such as AMZN and MSFT.
Dell Technologies (DELL) share price chart
AVGO takeover is far from complete
“For the Commission to go to phase two, there has to be a real competition problem - horizontal, vertical, foreclosure risk - and I think we can show those risks don’t really exist in this case,” a source close to the deal told Reuters.
It also seems that Broadcom (AVGO ) is going against the growing consensus to increase prices and has announced it will not be raising prices and they will remain where they are.
President and CEO for Broadcom, Hock Tan wrote in a blog post on 26 October that its growth strategy is not focused on raising prices of VMWare (VMW) products but “creating technology and products that provide clear value to customers and continuing to improve them”.
“We fuel growth by offering more and better products so customers are using more of our entire portfolio of technology products, rather than just one or two,” Tan wrote in his post.
“By delivering long-term value to customers and investing in improved, customer-focused R&D, we can innovate, scale and offer better products without raising prices.”
For now, Michael Dell and other VMW shareholders will have to wait before they know more about the up-and-coming pay-out they hope to receive.
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