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Commentary

Dell Buyout of EMC Could Shift Balance of Power in the Industry

Big industry names will be affected by the newly created enterprise's ability to sell fully integrated solutions.

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Dell and Silver Lake Partners on Oct. 12 announced the takeover of  EMC (EMC) in a transaction valued at approximately $67 billion. The deal has been approved by EMC's board of directors. Under the terms, EMC shareholders will receive $24.05 per share in cash plus approximately 0.111 shares of new tracking stock, which represents EMC's economic interest in VMware. Total consideration will depend on the market price of VMware shares but, as of the middle of last week, the combination of cash and tracking stock shares equated to $33.15 per share.

We are increasing our fair value estimate for EMC to $30 per share based on details included in the announcement and the likelihood of the deal going through as planned. The assumptions in our discounted cash flow model remain largely unchanged and, as a stand-alone entity, EMC shares are worth $27 each.

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Peter Wahlstrom has a position in the following securities mentioned above: CSCO. Find out about Morningstar’s editorial policies.