EMC Said Planning to Sell Documentum Business Amid Dell Deal

Dell, EMC Divesting Assets on the Path to a Deal
  • Dell also said to seek buyer for Sonicwall, Quest for $4B
  • Dell and EMC are targeting deal completion by October

EMC Corp. is seeking to sell its Documentum business, part of a plan with acquirer Dell Inc. to divest more than $6 billion in assets as part of the largest technology takeover ever, people with knowledge of the matter said.

Dell is also proceeding with selling software assets Sonicwall and Quest, said the people, who asked not to be identified because the discussions aren’t public. The company would prefer to sell the divisions together for about $4 billion, the people said. Private equity firms and strategic suitors have expressed interest in the divestitures, they said.

Dell and EMC are selling divisions to reduce the debt burden the companies will assume if their $67 billion merger is completed later this year. Dell, which has said it will add about $50 billion in debt to get the deal done, expects the acquisition to close between June and October, according to the people familiar with the matter.

Dell agreed to sell its information-technology services businesses to NTT Data Corp. on March 28 for more than $3 billion. The business, known as Dell Services, includes much of what was formerly called Perot Services.

David Frink, a spokesman for Dell, declined to comment, as did Dave Farmer, a spokesman for EMC.

Documentum Software

EMC agreed to acquire Documentum, software used to secure and track corporate documents and files, for $1.7 billion in 2003. Documentum has annual revenue of about $600 million and profit margins of more than 30 percent, according to a person familiar with the matter. A private equity firm will probably acquire it, though a sale won’t happen quickly, the person said.

The asset sales aren’t related to Dell’s debt financing for the acquisition. Dell is close to selling its first tranche of debt of about $11 billion, called Term Loan A, according to the people familiar. About 24 banks are syndicating the debt globally, the people said, and Dell will sell an additional $16 billion in high-grade debt in June or July. The final unsecured $8 billion tranche of debt, Term Loan B, will be offered later this year, the people said.

Credit rating organizations have generally blessed Dell’s deal for EMC, in which the Round Rock, Texas-based PC maker will pay $24.05 a share in cash along with tracking stock tied to EMC’s stake in VMware Inc. That’s because the acquisition of EMC, which makes storage devices, will lessen Dell’s dependence on the flagging PC market and allow the combined company to generate more than enough free cash to cover the additional debt, Jason Pompeii, a senior director at Fitch Ratings Ltd., said earlier this year.

(An earlier version of this story was corrected to show EMC is selling the Documentum business.)

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