VMware In Talks To Acquire Pivotal For $15/Share

  • General
  • August 15, 2019
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  • 5 minutes read
Pivotal CEO Rob Mee

image: Web Summit on Flickr

Pivotal has announced that there have been talks between itself and VMware, a long-time partner, to acquire the former for $15 per share, a roughly 81% premium to an $8.30 price as at the time of announcement. No final deal has been reached between the two, with negotiations still underway.

Pivotal and VMware have long connections to each other. They are long-term strategic partners and have one common shareholder: Dell, which controls a majority stake in both companies. VMware was once an independent company in its own right, before being acquired by EMC north of a decade ago. Dell got hold of VMware when it acquired EMC in a $67 billion deal in 2016, although VMware was taken public by EMC long before that [EMC held a majority stake in publicly traded VMware which was transferred to Dell after its acquisition].

Pivotal on the other hand was spun out as a standalone company from EMC in 2012 [EMC held a majority stake]. It got its name from Pivotal Labs, a software startup EMC acquired the same year. Before going public, the newly formed Pivotal raised funding from several investors, including General Electric, Ford, Microsoft, EMC-controlled VMware, and EMC itself. Dell got hold of EMC’s majority stake in Pivotal from its [aforementioned] 2016 acquisition.

VMware CEO Pat Gelsinger

Photo by Cody Glenn/Web Summit via Sportsfile

VMware, Pivotal and Dell have had close relationships with each other over the years even as they operated independently. [For example] Not long ago, Dell returned to the public market — after going private in 2013 — through a deal with VMware. The deal involved a share swap between publicly traded VMware and a then private Dell, to make Dell shares publicly traded.

Pivotal was spun off as a public company by Dell last year. With Dell holding majority stakes in both Pivotal and VMware, [VMware] acquiring Pivotal seems like Dell getting hold of its own property again, although it’s not really that, as there are other external VMware shareholders.

Pivotal’s shares have stumbled 66% since the start of this year. Sometime in June, its shares went down 41% after the company issued financial guidance that was lower than analysts’ expectations.

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