Why Investors Should Own EMC Shares, New Tracking Stock Into Dell Deal...

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  • The share price of EMC Corporation EMC has increased 16.87 percent over the past month, reaching a high of $27.863 on October 9.
  • Brean Capital’s Ananda Baruah has maintained a Buy rating on the company, with a price target of $31.
  • Following the announcement that Dell was purchasing EMC at $33.15 per share, Baruah believes that the might be “an interesting structure to invest into the deal.”

Analyst Ananda Baruah mentioned that the deal was expected to close in mid-2016, and had a 60-day “go shop clause,” under which other prospective acquirers could make bids.

Related Link: EMC-Dell: Biggest Tech Merger Of All Time

Following the closure of the deal, a new “tracking stock” is likely to be created, given Dell’s current ownership of VMware, Inc. VMW. “This stock will also file with the SEC and will report Dell / EMC metrics on a quarterly basis,” Baruah stated.

According to the Brean Capital report, “EMC and the new tracking stock could be interesting to own into the deal.” The deal is also expected to be positive for VNMware, about 80 percent of which is owned by EMC.

The company also announced that it intended to take its Big Date business, Pivotal, public in the near future.

“Based on EMC’s initial remarks, we believe the synergies could be about $2 - $4B of rev synergies and ~$1B in cost synergies over the next few years, across all portfolios including VMW,” the report stated.

Related Link: Dell + EMC = VMware Unchained?

The deal is also expected to drive cross-selling opportunities, while VMware is expected to benefit from scaling across Dell’s sales force and customer base.

“We believe that eventually they can take the combined Dell-EMC company public once tuned up and positioned well could create another appreciation opportunity,” Baruah added.

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Posted In: Analyst ColorReiterationAnalyst RatingsTechAnanda BaruahBrean Capital LLC
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