DVMT/VMW: VMW Minority Shareholders Have a Stronger Hand Than Holders of Dell’s Tracking Stock

Event Driven Takeaways

  • The minority shareholders of VMware will likely see greater legal protections than the holders of Dell’s tracking stock in the event of a Dell/VMware merger.
  • A reverse merger between Dell and VMware will invite review under the entire fairness standard, should shareholders file a lawsuit in the future.
  • Non-Dell shareholders in VMware would be treated as a separate class for voting purposes if VMware issues new common stock in excess of 20% to acquire Dell. This means that VMware’s minority shareholders would hold voting power in a potential transaction.
  • The ratio of the merger consideration will likely skew in favor of the VMware minority shareholders, despite the special voting rights provision and the existence of a Capital Stock Committee at Dell to protect the financial interests of the tracking stockholders.

VMware’s minority shareholders will likely enjoy a stronger hand compared to the holders of Dell Technologies’ tracking stock in the event of a reverse merger between the companies, according to several experts that spoke to Event Driven. Minority shareholders of VMware have “procedural protections” that put them in a better position than holders of Dell’s tracking stock, according to a securities litigator who has represented plaintiffs in class action lawsuits before the Delaware Chancery Court. On the basis of the litigator