By Patrick Thomas
Software maker VMware Inc. is in talks to bring its former spinoff back into the fold.
VMware said Wednesday it has held discussions to buy Pivotal Software Inc. for $15 a share in cash, a deal that would value the cloud software provider at more than $4 billion. Special committees of both companies' board of directors are proceeding to negotiate a deal, VMware said in a securities filing.
The deal would represent an 80% premium to Pivotal's Wednesday closing price of $8.30 a share. Pivotal, a spinoff of EMC Corp. and VMware, is valued at roughly $2.25 billion, according to FactSet.
Pivotal shares rose 71% to $14.20 in after-hours trading. VMware ticked down 3.6% and Dell was off 1.7%.
"We are, through a Special Committee of our board of directors, in discussions with VMware regarding a potential business combination, and we are negotiating a deal where VMware would acquire our Class A Common Stock for $15 per share," a Pivotal spokeswoman said in a statement. "But we have not reached a definitive agreement. And while VMware is a strategic partner, there is no guarantee one will be reached."
Dell Technologies Inc., which bought EMC for $67 billion in 2016, owns a roughly 80% stake in VMware. Dell returned to the public markets in December, five years after founder Michael Dell and private-equity firm Silver Lake took the personal-computer maker and data-storage company private in the biggest technology-leveraged buyout.
As part of the transaction, VMware has asked Dell to convert its Pivotal class B shares to class A and the two sides are discussing a to be agreed upon exchange ratio, according to the filing. The deal would also require a majority of Pivotal shareholders approving the transaction.
Pivotal shares are down about 65% over the past 12 months.
Write to Patrick Thomas at firstname.lastname@example.org