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US: Billion-dollar tax bill could jeopardize Dell-EMC merger

By  |  November 11, 2015

A billion-dollar tax burden created by the issuance of tracking stock could reportedly impede Dell Inc.’s $67 billion plan to acquire EMC Corp.

The issuance of VMware Inc. tracking stock to EMC shareholders could possibly result in a $9 billion tax bill, jeopardizing the proposed deal, Re/code reported Tuesday citing sources familiar with the matter.

Dell’s offer includes $24.05 in cash for each EMC share and another $9.10 in “tracking stock” linked to the overall value of the VMWare shares owned by EMC. If the deal is approved, shareholders would not hold actual VMWare stock, but would be the “tracking stock” that represents only a portion of those shares’ value.

The tracking stock is expected to reduce the amount Dell would need to borrow for the acquisition but it could also disqualify the company for a type of tax treatment considered crucial to the deal. Massachusetts-based EMC owns an 80 percent stake in VMware.

Full content: Re/Code

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