EMC could be bought out by its own subsidiary
Rumors of the Hopkinton-based storage company’s (NYSE: EMC) fate have been circulating for the past year or so, but those rumors are ramping up big time. The latest news — from tech news site Re/code— suggests that the firm could be acquired by VMWare Inc., a company that EMC is the majority owner of.
Citing unnamed sources, Re/code said the unusual acquisition — called a downstream merger — “is one of several options EMC’s board is exploring as part of a wide-ranging strategic review of its operations and as a partial response to pressure from an activist shareholder.”
The acquisition would help streamline EMC’s operations and save money, Re/code reported.
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EMC has also reportedly been discussing buying up its remaining stake in California-based data center virtualization company VMWare (NYSE: VMW). It owns about 80 percent of VMWare currently.
Activist investor Elliott Management Corp. has been pressuring EMC to spin off its stake in VMWare, but is reportedly behind this latest potential merger between VMWare and EMC.
Elliott has a history of getting what it wants. Just last month, Citrix Systems replaced its CEO after pressure from Elliott.
It’s still too early to know how big this deal would be and what an EMC-VMWare merger would look like. But the combination would be giant. VMWare reported $6.04 billion in revenue last year while EMC reported about $24 billion in sales.
EMC shares rose more than 3 percent Wednesday to close at $26.85. However, shares are down 9 percent since the beginning of this year.