Dell can buy back VMWare shares

Dell logoTinbox shifter Michael Dell said he could write a $3 billion cheque to buy back VMWare tracking stock to help finance its EMC acquisition.

This is important as it shows that Dell is working out ways to jack-up VMware’s value. The plans to issue a tracking stock have weighed on VMware’s common shares, which have lost a quarter of their value since the acquisition of EMC was announced in October.

Under the deal, EMC shareholders will receive 0.111 VMware tracking share for each EMC share, a move intended to give investors exposure to VMware, which is growing faster than EMC.

Dell said in a registration statement Monday that Dell “intends to consider opportunities to repurchase shares.”

Dell said it could support up to $3 billion in share repurchases and other types of payments and that the amount may increase over time, depending on its net income.

Dell said its goal will be to reduce its debt load in the first 18 to 24 months to achieve an investment-grade rating. Dell will have $49.5 billion in debt under current plans to finance the EMC deal.

Dell has reduced its debt by $4.5 billion, including $2.5 billion paid off by Dell itself. In addition, Denali Holdings, the holding company owned by private equity firm Silver Lake Partners and Michael Dell that controls Dell, paid off a $2 billion loan from Microsoft.