The sell-off, expected to raise up to $9.7bn, will help to substantially reduce Dell's debt accrued from the EMC acquisition a few years ago.
A separation has long been mooted, and while VMware has enjoyed tapping into some of Dell's sales channels, for a number of years now it has developed its own relationships with other security and cloud software partners - independent of Dell.
Michael Dell, chairman and CEO of Dell Technologies, said in an open letter to customers and partners: “With this announcement we will be even stronger. By simplifying the ownership and capital structures of Dell Technologies and VMware we will unlock new opportunities to innovate and invest in our companies and across our ecosystems.”
Zane Rowe, interim CEO of VMware, added: “We will have an enhanced ability to extend our ecosystem across all cloud vendors and on-premise infrastructure vendors, and a capital structure that will support growth opportunities.”
The transaction is expected to close during the fourth quarter of this year. Afterwards, Michael Dell will remain chairman and CEO of Dell Technologies, as well as chairman of the VMware board.
Zane Rowe, for now, will remain interim CEO of VMware and the VMware board of directors will remain unchanged after the deal, said Dell Technologies. Former VMware CEO Pat Gelsinger recently left the company to become CEO of Intel, the company where he started out as an engineer.
At closing, VMware will distribute a special cash dividend of $11.5bn to $12bn to VMware shareholders, including Dell Technologies.
Based on Dell Technologies' current 80.6% ownership in VMware, it would receive $9.3bn to $9.7bn of that amount, and says it intends to use it to pay down debt.
