Dell jumps as it unveils VMware stock spinoff plan

Dell jumps as it unveils VMware stock spinoff plan

Dell shares rose as much as 9% in extended trading on Wednesday after the company announced its plan to proceed with the spinoff of its 81% ownership of enterprise software maker VMware. The deal should close in the fourth quarter of 2021.

The move isn't a surprise. Dell is moving forward with a process it has long considered as a means of paying down its debt.

VMware will collectively distribute a cash dividend worth $11.5 billion to $12 billion to shareholders, including Dell, Dell said in a statement. Dell will receive $9.3 billion to $9.7 billion, which will position it well for investment grade ratings, the company said. Dell currently has a BB+ credit rating from S&P Global, giving the company a speculative grade, according to S&P Capital IQ.

When the deal closes, Dell shareholders will receive 0.44 shares of VMware stock for each Dell share, although the ratio could vary. VMware stock will take on a single-class structure after the deal as VMware class B shares become class A shares. Dell and VMware will continue a commercial relationship.

"We felt like this was beneficial for our shareholders because it eliminates a dual-class share structure, and it allows us to operate in broadened ecosystem,"