EMC To Pay Dell $2 Bln As Termination Fee In 'go-shop' Period

(RTTNews) - EMC Corp (EMC.N) announced Tuesday that it will pay Dell Inc $2 billion if its about $67 billion deal with the PC maker is terminated for a "superior proposal" before December 12.

As per the terms of the Merger Agreement, EMC may solicit alternative acquisition proposals from third parties until 11:59 p.m. on December 11, 2015.

The Merger Agreement contains specified termination rights for both Dell and the EMC, including that, in general, either party may terminate if the Merger is not consummated on or before December 16, 2016. If the Merger Agreement is terminated under certain specified circumstances, including in connection with EMC's entry into a definitive agreement for a superior proposal, EMC must pay Parent a termination fee of $2.5 billion.

Further, if the Merger Agreement is terminated under certain specified circumstances and, within 12 months after such termination, EMC enters into a definitive agreement providing for, or consummates, an acquisition proposal, EMC must pay Parent a termination fee of $2.5 billion.

In connection with the parties' allocation of risk related to financing for the transaction, the Merger Agreement also provides that Dell is required to pay EMC a termination fee of $4 billion under specified circumstances, and in certain instances, an alternative termination fee of $6 billion.

On Monday, PC maker Dell Inc. agreed to acquire data-storage company EMC Corp. for about $67 billion in cash and stock, while maintaining EMC's virtualization software company VMware Inc. (VMW) as a publicly-traded company.

The acquisition will be made by Dell, together with its owners, Michael Dell, founder, chairman and chief executive officer of Dell, MSD Partners and private equity firm Silver Lake. The transaction is expected to close in the second or third quarter of Dell's fiscal year ending February 3, 2017.

Under the terms of the deal, EMC shareholders would receive $24.05 per share in cash in addition to about 0.111 shares of new tracking stock linked to a portion of EMC's economic interest in the VMware business.

EMC shareholders would receive a total combined consideration of $33.15 per EMC share, which represents an almost 19 percent premium to EMC's closing stock price of $27.86 on Friday, October 9.