Item 8.01 Other Events.
Exploration of Potential Transaction
On July 15, 2020, Dell Technologies Inc. ("Dell") announced that it is exploring
potential alternatives with respect to its ownership interest in VMware, Inc. (
"VMware"), including a potential spin-off of its ownership interest to Dell
stockholders that is intended to qualify as generally tax-free for U.S. federal
income tax purposes to Dell and its stockholders (a "Spin-off"). VMware has
formed a special committee of the board of directors (the "Special Committee")
to evaluate and engage in discussions and negotiations with Dell with respect to
any proposal that may be made by Dell with respect to a Spin-off. Although the
process is only at an exploratory stage, VMware believes that a Spin-off may be
value-enhancing to VMware and its stockholders and could result in a simpler
capital structure and a broader stockholder base, provide greater strategic
flexibility and address certain governance arrangements, while still maintaining
a mutually beneficial strategic and commercial partnership with Dell, which
includes supporting our numerous joint customers.
As part of the discussions, VMware expects that it may negotiate with Dell the
payment of a special cash dividend by VMware, which would be paid on a pro rata
basis to all of VMware's stockholders. In the event VMware determines to declare
such a dividend, VMware expects that it would be funded in part through the
incurrence of new indebtedness. VMware believes that in any potential Spin-off
it would be important to retain VMware's existing investment grade rating. In
addition, VMware expects that any discussions with respect to a Spin-off would
address the further formalization of certain mutually beneficial existing
arm's-length commercial arrangements that reflect the close operating
relationship currently in place between VMware and Dell, including go-to-market,
services, research and development, and intellectual property agreements, to
provide for ongoing strategic benefits and continued support for customers of
both companies following a Spin-off. Any potential Spin-off would not occur
prior to September 2021.
There can be no assurance that any discussions with respect to a potential
Spin-off will result in the entry into definitive agreements concerning a
Spin-off or, if such definitive agreements were to be reached, that they would
reflect terms consistent with those described above or would result in the
consummation of the Spin-off transactions provided for in such definitive
agreements. Discussions concerning a potential Spin-off and related matters may
be terminated at any time by VMware or Dell.
VMware does not intend to update, and disclaims any obligation it may have to
update, the foregoing disclosure.
Share Repurchase Authorization
On July 15, 2020, the Board of Directors of VMware extended authorization of
VMware's existing stock repurchase program, which currently has approximately
$719 million of VMware's Class A common stock remaining, to run through the end
of fiscal year 2022 and authorized the repurchase of up to an additional $1.0
billion of VMware's Class A common stock through the end of fiscal year 2022.
Stock repurchases may be made from time-to-time in open market transactions or
privately negotiated transactions. The timing of any repurchase and the actual
number of shares repurchased will depend on a variety of factors, including
VMware's stock price, corporate and regulatory requirements and other market and
economic conditions.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements that are
based on VMware's current expectations, including, among other things,
statements regarding the terms of a Spin-off, including VMware's proposed
payment of a special cash dividend and entry into commercial arrangements with
Dell in connection with a Spin-off and the proposed completion date thereof, and
future stock repurchases. These forward-looking statements are subject to the
safe harbor provisions created by the Private Securities Litigation Reform Act
of 1995. Actual results could differ materially from those projected in the
forward-looking statements as a result of certain risk factors, including but
not limited to: (i) the possibility that Dell does not, or that the Special
Committee determines not to, pursue a Spin-off or transactions related thereto;
(ii) VMware's ability to pay a special cash dividend in connection with a
Spin-Off or repurchase shares, (iii) the impact of the COVID-19 pandemic on
VMware's operations, financial condition, VMware's customers, the business
environment and the global and regional economies; (iv) adverse changes in
general economic or market conditions; (v) delays or reductions in consumer,
government and information technology spending; (vi) competitive factors,
including but not limited to pricing pressures, industry consolidation, entry of
new competitors into the virtualization software and cloud, end user and mobile
computing, and security industries, as well as new product and marketing
initiatives by VMware's competitors; (vii) the ability to successfully integrate
into VMware acquired companies and assets and smoothly transition services
related to divested assets from VMware; (viii) rapid technological changes in
the virtualization software and cloud, end user, security and mobile computing
industries; (ix) VMware's customers' ability to transition to new products,
platforms, services, solutions and computing strategies in such areas as
containerization, modern applications, intrinsic security and networking, cloud,
digital
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workspaces, virtualization and the software defined data center, and the
uncertainty of their acceptance of emerging technology; (x) VMware's ability to
enter into, maintain and extend strategically effective partnerships and
alliances; (xi) the continued risk of litigation and regulatory actions; (xii)
VMware's ability to protect its proprietary technology; (xiii) changes to
product and service development timelines; (xiv) VMware's relationship with Dell
and Dell's ability to control matters requiring stockholder approval, including
the election of VMware's board members and matters relating to Dell's investment
in VMware; (xv) VMware's ability to attract and retain highly qualified
employees; (xvi) the ability of VMware to utilize its relationship with Dell to
leverage go-to-market and product development activities; (xvii) risks
associated with cyber-attacks, information security and data privacy; (xviii)
disruptions resulting from key management changes; (ix) risks associated with
international sales such as fluctuating currency exchange rates and increased
trade barriers; (xx) changes in VMware's financial condition; (xxi) geopolitical
changes such as Brexit and increased tariffs and trade barriers that could
adversely impact VMware's non-U.S. sales; and (xxii) other business effects,
including those related to industry, market, economic, political, regulatory and
global health conditions. These forward-looking statements are made as of the
date of this Current Report on Form 8-K, are based on current expectations and
are subject to uncertainties and changes in condition, significance, value and
effect as well as other risks detailed in documents filed with the Securities
and Exchange Commission, including VMware's most recent reports on Form 10-K and
Form 10-Q and Current Reports on Form 8-K that VMware has filed and may file
from time to time, which could cause actual results to vary from expectations.
VMware assumes no obligation to, and does not currently intend to, update any
such forward-looking statements after the date of this Current Report on Form
8-K.
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