Updated Monday:

Enterprise information technology giant Dell Technologies Inc. Monday announced it will become a publicly traded company again following a deal to buy out investors in a stock created to track the performance of its subsidiary VMware Inc.

The deal, which follows months of deliberation by Dell’s board of directors over its strategic options, was approved Sunday night by the boards of Dell and VMware. Dell, founded and still helmed by Michael Dell (pictured), would remain under his firm control.

Dell will offer shareholders either $109 a share in cash or 1.3665 shares of newly issued Class C stock for each share of the tracking stock, called DVMT after its stock ticker symbol. The cash will come from an $11 billion special dividend VMware will issue to its shareholders. Some $9 billion of that money will go to majority owner Dell.

Overall, the move would simplify the company’s arcane stock structure, resulting in just two classes of share: Dell’s Class C shares and VMware’s existing shares. The offer represents a 29 percent premium over the DVMT shares’ closing price Friday. Dell said the deal is expected to close in the fourth quarter.

The move completes one of the most significant transformations in computer industry history, culminating a business computing giant spanning a wide range of hardware and software products and services.

“Dell went private to buy time to transform itself into a true enterprise player without the drag of quarterly reporting to Wall Street,” said Dave Vellante, longtime industry analyst and SiliconANGLE co-chief executive. “Acquiring EMC accelerated that vision. Dell emerging as a public company and major force in the enterprise within two years is pretty impressive.”

The DVMT tracking stock, or Class V Common Stock, was created back in 2016 in order to help Dell finance its $67 billion takeover of enterprise storage technology company EMC Corp., then the largest tech acquisition in history. The EMC acquisition saw Dell take on massive debt, and two years later it still owes about $52.7 billion.

The VMware-tracked shares were issued to EMC shareholders as part of Dell’s cash-and-stock acquisition of that company in order to give EMC holders continued exposure to the company and reduce the cash outlay for the deal. EMC owned about 80 percent of VMware at the time. The tracking stock is now up almost 100 percent since that deal was consummated.

By buying up the DVMT stock, Dell will gain direct control over VMware. The deal will also give it more leverage should it decide to pursue a merger with VMware at a later date, so it could be seen as step one in a two-part deal, sources told the Wall Street Journal.

Vellante said the proposed deal to buy DVMT’s stock would give shareholders a good return on their investment while helping Dell clean up the complexity of VMware’s ownership structure.

“By going public, Dell can take cash off the table via its presumed public offering and give shares and some cash in return,” Vellante said. “It will also give Dell more direct control over VMware and its future while at the same time keeping VMware independent. By buying back the outstanding DVMT shares, Dell claws back more VMware ownership.”

Dell had reportedly been considering a merger with VMware for several months as one of several possible options its been considering to pay off more its debt. However, it quickly became apparent that some VMware tracking stock holders were opposed to that move, and the Journal said a merger cannot be done at this time because of continued resistance from its board and a special committee.

Other potential options considered by Dell included going public itself, or doing nothing at all, it was reported at the time. In March, Dell subsidiary Pivotal Software Inc. announced it was filing for an initial public offering in a move that was also said to be related to Dell’s plans to pay off its debt.

“It remains to be seen how much of the cash raised [from Dell’s presumed public offering] will go to retiring debt,” Vellante said. “My sense is Dell is retiring debt out of its free cash flow each quarter and the real motivation here is to capitalize on the hot market and excellent returns that VMware and DVMT have had since the deal was announced. DVMT and VMware are really strong stocks right now and the data center is smoking. It’s a good time to go public again.”

Analyst Holger Mueller of Constellation Research Inc. said the deal was likely motivated by Dell deciding to prioritize paying off its debt over its other goals, which include transforming itself to become a more relevant player in a technology world that’s increasingly dominated by cloud computing.

“Less than two years ago Dell executives praised the advantage of being privately help to allow the vendor to transform,” Mueller said. “But financial and tax structures can change, and so it looks that reducing debt, even if it means going public, is better for Dell stakeholders.”

Still, Mueller said that from a customer viewpoint, very little would change under the proposed buyout, and Dell still needs to iron out what the future of its products and services for cloud-based IT infrastructure will look like.

“Whether or not that product development and transformation happens as a private or public company is secondary,” he said. “It’s the research and development and go-to market process that needs to happen, and better sooner than later.”

With reporting from Robert Hof

Image: SiliconANGLE