Apr 14 (Reuters) – Dell Technologies Inc announced on Wednesday that it will cede its 81% stake in cloud computing software maker VMware to shareholders, in a move that will help the PC maker reduce its debt.
VMware is currently Dell’s best performing unit and has benefited from companies looking to cut costs and move to the cloud, a shift that has been accelerated by the COVID-19 pandemic.
Dell shares rose more than 8% in after-market trading.
As part of a transaction that is expected to be tax-free, VMware will distribute a cash dividend of between $ 11.5 billion and $ 12 billion to all of its shareholders, including Dell, who will receive between $ 9.3 billion and $ 9.7 billion.
VMware interim CEO Zane Rowe told Reuters in an interview that VMware will use between $ 2.5 billion and $ 3 billion in cash from its balance sheet to pay the dividend and fund the remainder with debt. Rowe said VMware expects to have an investment grade credit rating after the deal.
The special dividend will help Dell reduce its $ 41.62 billion of debt, much of which was taken over during its $ 67 billion acquisition from then-majority owner of VMWare, EMC, in 2016.
(Reporting by Munsif Vengattil in Bengaluru and Stephen Nellisen San Francisco; Edited in Spanish by Rodrigo Charme)