Dell Technologies (DELL) to Explore VMware (VMW) Spin-Off

• Dell Technologies is exploring a potential spin-off of its 81% ownership of VMware. Potential deal could unlock value for shareholders
• To benefit team members, customers and partners with industry leading solutions, in the event of a spin-off, Dell Technologies will seek to maintain the mutually beneficial strategic relationship currently in place with VMware
• In the event of a spin-off, Dell Technologies intends to negotiate terms consistent with an investment grade rating for both companies

Dell Technologies (NYSE: DELL) is exploring a potential spin-off of its 81% equity ownership interest in VMware (NYSE: VMW). Although this exploration is in an early stage, Dell Technologies believes a spin-off could benefit both Dell Technologies and VMware shareholders, team members, customers and partners by simplifying capital structures and creating additional long-term enterprise value. Any potential spin-off would not occur prior to September 2021 and would be intended to qualify as tax-free for U.S. federal income tax purposes.

Additionally, Dell Technologies continues to evaluate a range of strategic options concerning its ownership interest in VMware, including maintaining its current ownership in the company.

"The strategic relationship between Dell Technologies and VMware has never been stronger," said Michael Dell, chairman and chief executive officer, Dell Technologies. "For more than 20 years, we've innovated for our customers and created substantial growth and value for both companies and our teams. Regardless of the options we are exploring to create additional value, we are accelerating our strategy - which remains unchanged. We are focused on winning in the consolidating markets where we operate and innovating across the Dell Technologies portfolio to create integrated solutions that turn data into insights and action."

As part of its exploration of a potential spin-off, Dell Technologies expects it would seek to formalize mutually beneficial commercial arrangements similar to those currently in place. This includes go-to-market, services, research and development, and intellectual property agreements between Dell Technologies and VMware, providing ongoing strategic benefits and continued support for customers of both companies following any spin-off.

If it determines to pursue a spin-off, Dell Technologies also expects to negotiate and agree to certain related terms and conditions with a special committee of the Board of Directors of VMware and the Board of Directors of VMware. In that event Dell Technologies would look to negotiate the payment of a special cash dividend by VMware that would be paid on a pro rata basis to all VMware shareholders.

It is important to Dell Technologies that both companies have appropriate capital structures immediately following any spin-off. Dell Technologies' goal would be to maintain VMware's credit rating of investment grade and improve Dell Technologies' credit rating at the time of or shortly following a potential spin-off and accelerate the timeline through which Dell Technologies can achieve an investment grade credit rating. However, Dell Technologies can give no assurance that any specific ratings would ultimately be obtained for either company in the event of a spin-off.

Dell Technologies is the market leader and continues to gain share through its growing client and infrastructure businesses, including PCs, peripherals, mainstream servers, external storage, and cloud. "No other company can match the depth and breadth of Dell Technologies' portfolio. Our business is strong and has runway to grow for decades to come," said Michael Dell.

Additional information regarding this announcement can be found in the amended Schedule 13D filed by Dell Technologies with the United States Securities and Exchange Commission (SEC) on July 15, 2020.

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