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Dell to use VMware halo to fund EMC deal

Company will offer EMC shareholders additional tracking stock in high-valued virtualisation company

Mergers and acquisitions, IT Business, Dell Corporation

Dell will use a novel mix of cash and tracking stock to fund its purchase of EMC, harnessing the high value of EMC's 80% stake in VMware to fund the deal, according to several reports.

If the deal goes through, Michael Dell would retain a majority stake in virtualisation company VMware, a stake thought to be EMC's most lucrative asset, worth $27bn at the current share price.

Dell will reportedly offer EMC's shareholders a price of $27.25 per share, according to insiders. But to sweeten the deal, Dell will also give tracking stock tied to the performance of VMware. Reports vary on the valuation of this stock. Some media outlets price the whole deal, including tracking stock at the equivalent of $30 per share, for a total of $50bn; others price it at $33 per share, for a total of $55bn.

Either deal would represent the largest ICT acquisition in history.

Dell became a private company in the fourth quarter of 2013 after its founder, Michael Dell, engaged in a months-long battle with shareholders. According to the Financial Times, its private status has complicated its pursuit of EMC. Dell is estimated to be around $12bn in debt and Michael Dell struggled to raise the approximately $25bn needed to take the company private, a figure just half of EMC's $50bn market capitalisation.

The FT also claims Michael Dell is currently trying to secure around $40bn in loans to acquire EMC.