Dell founder and chief executive officer Michael Dell on Monday defended the bank debt his company is taking on in acquiring data storage business EMC.
The personal computer manufacturer signed a deal to take over EMC for 67 billion dollars, offering EMC 33.15 dollars per share, a price that includes 24.05 dollars in cash plus Dell shares covering the value of EMC-owned software firm VMware.
The offer is nearly 20 per cent higher than EMC’s closing price Friday of 28 dollars, making it the largest technology merger ever.
According to Bloomberg, the company is to finance the deal with 40 billion dollars in bank debt, this after Michael Dell with the help of capital investors took the company private in a 25-billion-dollar leveraged buyout in 2013.
Speaking in a teleconference, the founder said the debt would not be a burden as it would be paid down in the next two years through robust income. He gave no details as to the company’s financial health since the 2013 buyout, saying only that business was good.
The takeover of EMC will widen Dell’s data storage services, strengthening its position against rival Hewlett-Packard.
EMC as a specialist in the business data storage is competing against a multitude of new competitors from the internet-based cloud business. Its VMware subsidiary however is considered by experts to be the segment with the most growth potential and will continue to trade on the open market.
The deal is expected to receive final approval in mid-2016 after regulators and shareholders have given it their final review.