Elliott Management Acquires Huge Stakes in EMC Corporation (EMC) To Pursue the Spin-off of VMware, Inc (VMW)

Activist investor Elliott Management, headed by billionaire Paul Singer has acquired shares worth more than $1 billion in the cloud-storage company EMC Corporation (NYSE:EMC). Elliott plans to push EMC Corporation (NYSE:EMC) into spinning-off its virtualization software unit, VMware, Inc (NYSE:VMW), in which EMC Corporation (NYSE:EMC) holds an 80% stake.

CNBC’s David Faber reported that Elliott Management’s stake in EMC Corporation (NYSE:EMC) roughly amounts to 2% of the outstanding shares of the company, making Elliott a significant investor in the company. In the past Elliott has targeted some prominent names like Juniper Networks, Inc (NYSE:JNPR), Hess Corp. (NYSE:HES) and BMC Software, Inc (NASDAQ:BMC) but EMC Corporation (NYSE:EMC) represent one of its biggest target.

EMC Corporation (NYSE:EMC)

“The key here is, the focus is they [EMC Corporation (NYSE:EMC)] own 80% of VMware, Inc (NYSE:VMW) it being held back by being owned within EMC Corporation (NYSE:EMC) […] and the multiple is much lower than it otherwise would be. Tucci is retiring, that is the CEO of the company in February of next year, he is 66-years old. They believe there are a lot of strategic acquirers for the business for spinning out VMware, Inc (NYSE:VMW) and what’s left and so they are going at it. They [Elliott Management] believe they have the support of other larger shareholders,” Mr. Faber said in his report.

EMC Corporation consists of several units: Pivotal, its software development unit; RSA, a network security services provider; and VMware, Inc (NYSE:VMW). The company’s stock rose  by 94% over the last five years.

Speaking about the effectiveness of activist investors like Elliott Management, Mr. Faber said: “When you see activists in a stock, they are most effective when they are already being prodded on by large owners, who typically do not take activist stances in-part because they don’t want to jeopardize their 401K business”.

Disclosure: none

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