PVTL Pivotal Software Inc

By Maria Armental and Josh Beckerman 

Software company VMware Inc. reached agreements to buy Pivotal Software Inc. and security cloud provider Carbon Black Inc., VMware said Thursday. VMWare values the deals at a $4.8 billion.

"These acquisitions address two critical technology priorities of all businesses today -- building modern, enterprise-grade applications and protecting enterprise workloads and clients," WMware Chief Executive Pat Gelsinger said in a statement.

The proposed deals were disclosed as VMware reported results for the quarter ended Aug. 2, including a nearly $5 billion tax benefit tied to the transfer of some intellectual property rights to its Irish subsidiary.

The Silicon Valley company, which is majority-owned by Dell Technologies Inc. and holds a roughly 15% stake in Pivotal, disclosed this month that it was discussing a potential acquisition of Pivotal for $15 a share. On Thursday, VMware said the proposed deal called for a blended price a share of $11.71, comprised of $15 a share in cash to Pivotal Class A stockholders, and VMware's Class B shares exchanged for Pivotal Class B shares held by Dell at a ratio of 0.0550 share of VMware Class B common Stock for each share of Pivotal Class B common stock.

The deal, with an expected net cash payout of $800 million, would increase Dell's stake in VMware to 81.09%, based on shares currently outstanding, VMware said Thursday.

VMware will acquire Carbon Black through a cash tender offer for $26 a share for a net cash payout of $1.9 billion.

Both deals are expected to close in the second half of the current business year, which ends Jan. 31.

Second-quarter profit surged to $4.93 billion, or $11.83 a share, from $644 million, or $1.56 a share, a year earlier. On an adjusted basis, profit rose to $1.60 a share from $1.54 a share a year earlier. Revenue rose 12% to $2.44 billion.

Analysts surveyed by FactSet expected $1.05 a share, or $1.55 a share as adjusted, on $2.43 billion in revenue.

The results included a paper loss of $538 million from its investment in Pivotal, which went public last year, compared with a $231 million gain on the investment in the year-ago period.

The so-called fair value of the Pivotal investment is primarily based on Pivotal's closing stock price on the last trading day of each fiscal quarter. Pivotal started trading at $16.75 when it went public but traded around $9 in early August, according to FactSet. On Thursday, the stock closed at $13.70.

Write to Maria Armental at maria.armental@wsj.com and Josh Beckerman at josh.beckerman@wsj.com

(END) Dow Jones Newswires

August 22, 2019 17:57 ET (21:57 GMT)

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