98% of voting shareholders voted in favor of the merger
On June 19, 2016, EMC Corporation (EMC) announced that its shareholders approved the merger agreement among Denali Holding, Dell, Universal Acquisition Co., and EMC. According to EMC, approximately 98% of voting shareholders cast their vote in favor of the merger. This represented 74% of EMC’s outstanding common stock. The deal is expected to close on “the original terms and within the originally announced timeframe, subject to regulatory approval from China and satisfaction of customary closing conditions.”
In July 2016, proxy advisory companies ISS (Institutional Shareholder Services) and Glass Lewis recommended that EMC shareholders vote for the EMC-Dell merger. Earlier, another independent proxy advisory company, Egan-Jones Ratings Company, also issued a recommendation that shareholders vote for the merger.
Deal valued at $60 billion
The EMC-Dell acquisition deal is currently valued at $60 billion. This is $7 billion lower than what the deal was actually worth.
Dell is planning to sell ~$9 billion of unsecured junk bonds to back the EMC acquisition. Dell is largely expected to pay an interest rate of ~10% unless there is major improvement in the bond market.
Debt yields are high due to the volatile macroeconomic environment. This has resulted in below-par quarterly results for technological (QQQ) heavyweights such as Intel (INTC) and IBM (IBM). Western Digital’s (WDC) debt sale to fund its acquisition of SanDisk (SNDK) was also poorly received by investors.
Dell will thus have to shell out millions of dollars in interest expenses once its acquisition of EMC is complete.
In the next part of this series, we’ll discuss how Dell will benefit from the merger.