VMware in talks to acquire Pivotal

News of the all-Dell merger sees Pivotal stock rise to just under IPO level

VMWare building with arched glass front

VMware has said it is in talks to buy Pivotal Software, the virtualisation company revealed in a filing on Wednesday.

The deal would see VMware acquire all outstanding shares of Class A common stock of Pivotal, priced at $15 per share, although all aspects of the agreement are subject to change and VMware is permitted to walk away at any time.

However, if agreed, that price would be substantially higher than Pivotal's recent share price, which naturally rebounded to around $14 following news of the deal. It would also be the exact same price it listed during its IPO.

The deal is quite unique in the industry, given that Dell continues to own a majority stake in both VMware and Pivotal. Since being spun off from EMC Corporation (now Dell EMC) in 2012, Pivotal has worked to champion the Cloud Foundry, an open-source software platform used by most of the Fortune 500.

Despite seeing initial growth, with stocks rising to as much as $30, the company has struggled of late, and a disastrous financial quarter in 2019 saw stocks drop to as low as $8, losing $31.7 million in the process.

For its part, VMware has continued to work closely with Pivotal. Alongside Dell EMC, VMware remains a Cloud Foundry Foundation platinum partner, which includes sales of Pivotal services to its customers.

"VMware regularly evaluates potential partnerships and acquisitions that would accelerate our strategy," the company said in a statement. "Pivotal is a long-term strategic partner and we're already successfully collaborating to help enterprises in their application development and infrastructure transformation.

"VMware's Board of Directors will continue to act in the best interest of all shareholders. There can be no assurance that any such agreement regarding the potential transaction will occur, and VMware does not intend to communicate further on this matter unless and until a definitive agreement is reached."

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