The whole Dell related ownership structure is just ... odd.
Under the terms of the transaction, Pivotal's Class A common
stockholders will receive $15.00 per share cash for each
share held, and Pivotal's Class B common stockholder, Dell
Technologies, will receive approximately 7.2 million shares
of VMware Class B common stock, at an exchange ratio of
0.0550 shares of VMware Class B common stock for each share
of Pivotal Class B common stock. This transaction, in
aggregate, results in an expected net cash payout for VMware
of $0.8 billion. The impact of equity issued to Dell
Technologies would increase its ownership stake in VMware by
approximately 0.34 percentage points to 81.09% based on the
shares currently outstanding. VMware currently holds 15
percent of fully-diluted outstanding shares of Pivotal. The
transaction is expected to be funded through cash on the
balance sheet, accessing short-term borrowing capacity, and
approximately 7.2 million shares of VMware Class B common
stock to Dell.
> Under the terms of the transaction, Pivotal's Class A common stockholders will receive $15.00 per share cash for each share held, and Pivotal's Class B common stockholder, Dell Technologies, will receive approximately 7.2 million shares of VMware Class B common stock, at an exchange ratio of 0.0550 shares of VMware Class B common stock for each share of Pivotal Class B common stock. This transaction, in aggregate, results in an expected net cash payout for VMware of $0.8 billion. The impact of equity issued to Dell Technologies would increase its ownership stake in VMware by approximately 0.34 percentage points to 81.09% based on the shares currently outstanding. VMware currently holds 15 percent of fully-diluted outstanding shares of Pivotal. The transaction is expected to be funded through cash on the balance sheet, accessing short-term borrowing capacity, and approximately 7.2 million shares of VMware Class B common stock to Dell.
Ultimately, this transfers shares to Dell that, most likely, provides liquidity that could be used to pay a little bit of their massive debt ($56B) that is choking them. Dell is in financial trouble. See https://seekingalpha.com/article/4278101-dell-technologies-m...
"Pivotal trades at a loss but revenue is growing. Having said that, in its report to investors last month, after the release of its first quarter results for FY 2020, the company issued revenue projections that were lower than expected. Shares immediately suffered a more than 40 per cent fall and have not yet recovered. They're currently cruising along at about $10 apiece, five bucks below its 2018 IPO opening price of $15."
Aside from the wall of english words I have a rather limited understanding of what it actually says. Looks like a lot of weird dealings to me. And if it's described in that way I wonder if it's a good idea at all.
People that own one type of share of Pivotal are getting $15 per share for them. Dell, which owns a different type of share, is exchanging the Pivotal shares for VMWare shares. Because the shares of Pivotal and VMWare have different values, it isn't a 1:1 exchange, the VMWare shares are treated as being ~20 times more valuable.
I would say the transaction is mostly boring accounting, not anything weird. Who knows if Pivotal should operate as part of VMWare instead of independently, but once you decide to do that, you have to consolidate the ownership somehow.
An aside, the difference in the shares is so that Dell could keep control of the company while selling some of it on the stock market. I wonder if there is a good analysis of how companies with closely held control do over time.
Context: Dell has large stakes in both Pivotal and VMware
VMware buys Pivotal. Pivotal's regular shareholders get paid in cash per share ($15). Dell, which owns a separate class of shares, gets paid in VMware shares rather than cash. This is likely because Dell already has a large cash balance and they don't need any more cash.
They do make stuff. Idea is to make next generation software worse than previous generation. Make money by fiddling with those agile JIRA/Storyboards and endless bug fixing.
I don't know if this was financial engineering because Dell bought EMC/VMWare but it was the smaller company, so this is a way to just increase the ownership they have rather than take cash out of the company which they use to make purchases. I'm not a FA expert, only TA, but that's my thought here.
"Intel paid Dell in the form of rebates as part of an agreement to ensure that Dell would not use computer chips made by Advanced Micro Devices in its personal computers and computer servers, according to the civil charges."[1]
Dell paid the SEC $100 million in penalties, Intel $1.45 billion.
