Dell-EMC deal likely to include go-shop provision

Search for rival bids unlikely to yield better offers, say insiders

Tags: Dell CorporationMergers and acquisitionsUSA
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Dell-EMC deal likely to include go-shop provision Michael Dell had to sweeten a shareholder offer before, when he took Dell private, after a rival bid was tabled during the go-shop period. (Getty Images)
By  Stephen McBride Published  October 12, 2015

EMC has asked for a "go-shop" period to be included in Dell's acquisition proposal, which is expected to be finalised today, Reuters reported.

A go-shop period is common in acquisition deals. It allows the target company to seek rival bids and can often lead to a better deal for shareholders, as was the case when Michael Dell took Dell private. Dell had to sweeten his offer after a rival joint-bid from activist investor Carl Icahn and Blackstone Group.

EMC CEO Joseph Tucci has reportedly also negotiated a discount on any breakup fee due to Dell if EMC were to pull out of the agreement and accept an offer from another company. Sources claim that while Cisco, IBM and HP may all be possible alternatives, they are unlikely to outbid Dell.

The current offer for EMC is thought to be around $33 per share, a source said. Around $25 of this would be in cash, and the remainder would be in tracking shares that follow the performance of VMWare, the virtualisation firm in which EMC has an 80% stake. Under such payment terms, Dell's acquisition of EMC would be valued at around $55bn.

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