President of the New York Stock Exchange Thomas Farley and executives from Pivotal Software ring the opening bell at the New York Stock Exchange April 20, 2018.
Brendan McDermid | Reuters
Pivotal shares rose as much as 71% in extended trading on Wednesday after VMware said it’s proceeding with an agreement to acquire all outstanding shares of Pivotal’s class A stock at $15 per share in cash, an 80.7% premium on Pivotal’s $8.30 closing price.
VMware also said in a regulatory filing that it has requested that Dell exchange all outstanding shares of Pivotal’s class B stock, other than class B Pivotal shares owned by VMware, for Class A VMware stock. Dell controlled almost 81% of VMware’s outstanding common stock and more than 97% of the combined voting power of VMware’s outstanding stock as of May 3. Dell and Pivotal are negotiating an exchange ratio for the shares.
The transaction could contribute to the further diversification of VMware, which has moved to collaborate with cloud infrastructure providers like Amazon in order to enable existing customers to run their computing workloads in whatever environment they like.
Shares of Pivotal have declined 66% in the past year. On June 5 Pivotal stock declined some 41% after the company issued guidance that was below what analysts were expecting.
Pivotal went public in April 2018. VMware and DellEMC both contributed assets when Pivotal was established in 2013.
As a result of an agreement with Dell, VMware is the selling agent for certain Pivotal products, such that VMware collects cash that is then remitted to Pivotal, net of a contractual agency fee. As of May 3, VMware had a 16% financial interest in Pivotal and a 24% voting interest in the company.
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