Dell's high-profile acquisition of data storage vendor EMC makes sense for both EMC and its shareholders, according to an independent proxy advisory firm.
Officials with Glass Lewis said in a statement released by EMC that the deal—which is valued at more than $60 billion and includes not only EMC but its federated businesses, such as VMware, RSA Security and the Pivotal software unit—is "financially and strategically reasonable from the perspective of EMC and its shareholders."
"The proposed consideration represents what is, in our view, an attractive premium to the unaffected closing price of EMC shares and appears generally reasonable in numerous analyses presented by the independent financial advisors, including relative to peer trading multiples, premiums paid and discounted cash flows including stock based compensation expense," the firm stated. "The proposed consideration will allow shareholders to realize a substantial portion of their investment in cash and to continue to participate in the future performance of VMware."
The seal of approval comes two weeks before EMC shareholders meet July 19 to vote on the proposed merger, which would be the largest acquisition in tech industry history. When it was first proposed in October 2015, the price tag was put at $67 billion. Fluctuating stock prices are moving that number around a bit, but the price is still significant.
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EMC Chairman and CEO Joe Tucci said in a statement that the support of Glass Lewis is important, and confirms the benefits of the merger, which will create a combined company with the new name of Dell Technologies.
"The coming together of EMC and Dell is the best strategic option for all stakeholders," Tucci said. "The new Dell Technologies will be a powerhouse in the technology industry, with approximately $74 billion in revenues, a complementary product portfolio, and expanded market reach in a number of high-growth areas of the $2 trillion information technology market."
Dell executives are looking at the acquisition as a significant boost to its efforts to become a more complete enterprise IT solutions and services vendor that can better compete with the likes of IBM, Cisco Systems and Hewlett Packard Enterprise (HPE). In the past several years, Dell has bought a broad array of companies to help build out its portfolios in such areas as storage, networking, security, software and the cloud.
CEO Michael Dell also pointed to the transformation effort as a key reason for taking his namesake company private in 2013 in a $25 billion buyout. Through the new deal, Dell would acquire not only EMC and its significant capabilities in data storage and the cloud, but also its federated businesses, including VMware for virtualization, RSA for security, Pivotal for software, Virtustream for cloud computing and VCE for data center infrastructure.
To help finance the deal and reduce the post-acquisition debt, which could reach as much as $50 billion, Dell has been selling off assets. The company is selling its software business for $2 billion to private equity firms Francisco Partners and Elliott Management and its services business for $3 billion to NTT Data.
The deal has received the approval of antitrust regulators in the United States and Europe, and Dell executives are confident that China officials also will support it. The approval from China and the EMC shareholder vote are the two biggest hurdles that deal has yet to clear.
