Elliott Management Finally Had This Wish Granted In The $67 Billion Dell/EMC Deal

Last week’s rumors have turned into Monday morning reality as Dell announced its $67 billion purchase of EMC Corporation (NYSE:EMC). EMC’s shares are up by 1.79% in morningtrading following the revelation of its purchase. While the record tech deal is certainly intriguing in its own right, it’s all the more so to us given that it once again shows off the clout of activist investors in their ability to exert pressure and stimulate change at even the largest of companies.

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The purchase by privately-held Dell will further push its focus away from the sluggish PC market and into the much more lucrative and exciting enterprise solutions segment. Indeed, Dell Founder Michael Dell, who will lead the merged company as its Chairman and CEO, said the tie-up will “create an enterprise solutions powerhouse”. Although EMC will have the option to solicit better offers from other bidders, Dell’s offer isn’t expected to be topped by the likes of International Business Machines Corp. (NYSE:IBM) or Hewlett-Packard Company (NYSE:HPQ), two potential suitors for the storage company.

One other notable aspect of the deal is that the combined Dell/EMC Corporation (NYSE:EMC) entity will spin-off EMC’s 80% ownership stake in VMware, Inc (NYSE:VMW) into a tracking stock. A spin-off of EMC’s VMware stake was long sought by Elliott Management, headed by billionaire Paul Singer, which began pushing for the move over a year ago after taking a large stake in EMC. Elliott Management, which maintained a 33.6 million-share position in EMC as of June 30, was exerting more pressure recently on EMC to break itself up, which may have driven the company to accept Dell’s offer. Elliott Management issued a press release this morning expressing its support for the deal.

However, as we’ll see on the next page, not everyone is impressed by the offer.

As mentioned, not everyone is thrilled by the offer, or the move to turn VMware, Inc (NYSE:VMW) into a tracking stock. FBR & Co’s Daniel Ives described the deal as “a “bad dream” for EMC shareholders and more of a nightmare for VMW investors”, suggesting that a deal in the $35-$38 range would be fair valuation for EMC Corporation (NYSE:EMC) and its VMware, Inc (NYSE:VMW) stake. The $67 billion deal is worth $33.15 per share.

As of June 30, shareholders in our database were not very bullish on VMware, the shares of which are down by 8.44% this morning as investors clearly don’t like the implications of the deal for the company and its shareholders. The elite investors that we track held just 2.00% of the company’s stock on that date, worth $740 million. Matt Sirovich and Jeremy Mindich’s Scopia Capital was the largest shareholder among the 35 investors that we track which held long positions in the stock, owning 1.79 million shares.

On the other hand, 54 investors that we follow held 5.00% of EMC’s shares, worth $2.54 billion. Singer’s firm was the largest shareholder among those, followed by John A. Levin’s Levin Capital Strategies with 9.12 million shares and Ken Griffin’s Citadel Investment Group with 5.00 million shares.

Disclosure: None