(Reuters) — Dell Technologies said on Wednesday it would spin off its 81% stake in cloud computing software maker VMware to create two standalone public companies, in a move that will help the PC maker reduce its pile of debt.
VMware is currently Dell’s best-performing unit as it has benefited from companies looking to cut costs and move to the cloud, a shift that has been accelerated by the COVID-19 pandemic.
Shares of Dell rose more than 8% in extended trading.
VMware will distribute a special cash dividend of between $11.5 billion and $12 billion to all of its shareholders, including Dell, which will receive between $9.3 billion and $9.7 billion.
For Dell, the special dividend will help reduce its long-term debt of $41.62 billion, much of which was taken on during its $67 billion acquisition of VMWare’s then-majority owner EMC in 2016.
The companies said the deal will simplify their capital structures. Both companies will also enter into a commercial arrangement to continue to align sales activities and for co-development of solutions.
VMware, whose software helps companies squeeze more work out of data center servers, has been looking for a chief executive officer after previous boss Pat Gelsinger was tapped to lead Intel.
The spinoff plans were originally announced by Dell in July last year. The deal is expected to close in the fourth quarter.
VentureBeat’s mission is to be a digital town square for technical decision-makers to gain knowledge about transformative technology and transact. Our site delivers essential information on data technologies and strategies to guide you as you lead your organizations. We invite you to become a member of our community, to access:
- up-to-date information on the subjects of interest to you
- our newsletters
- gated thought-leader content and discounted access to our prized events, such as Transform 2021: Learn More
- networking features, and more