Moody's Investors Service ("Moody's") placed EMC Corporation's (NYSE: EMC) A1 senior unsecured rating under review for downgrade following today's announcement that it will be acquired by Dell Inc. (Ba2 CFR, rating under review for upgrade) for $24.05 per share in cash in addition to tracking stock linked to a portion of EMC's economic interest in the VMware, Inc. for a total transaction value of about $67 billion. Moody's expects to conclude the review upon the close of the transaction, which is expected to occur in the months of May to October 2016.

Dell plans to finance the cash portion of the transaction price through a combination of new common equity, new debt financing and cash on hand. There are no financing conditions to closing the transaction. Michael Dell and related stockholders are expected to own approximately 70 percent of the company's common equity, excluding the tracking stock. The transaction is subject to customary conditions, including receipt of required regulatory and EMC stockholder approvals.

Ratings placed under review for downgrade include:

Senior unsecured rating at A1

Senior unsecured shelf registration at (P)A1

Short term rating for commercial paper at Prime-1

RATING RATIONALE

The review, which could conclude in a multi-notch downgrade to speculative grade, will focus on the deal structure and potential subordination of EMC bonds to newly raised acquisition debt, as well as the ultimate resolution of the ratings review of Dell. Similar to what transpired after the leveraged buyout of Dell in 2013, Moody's believes that the combined company will allocate a majority of its cash flow to debt repayment. Accordingly, Moody's expects that adjusted debt to EBITDA will decrease to below 4x by the end of calendar year 2017.

A combination of the two companies will create an entity with significant scale and breadth of product offerings in the broad server, storage and PC markets. The merger will create the largest private technology company in the world based on revenues.

Moody's expects that any upgrade of Dell's CFR would likely be limited to one notch upon the close of the transaction.