Dell Sells Software Unit to Francisco Partners, Elliott

Updated on
  • Deal to help streamline company ahead of planned EMC merger
  • Marks debut for Elliott’s new PE arm Evergreen Coast Capital

Dell Inc. agreed to sell its software unit to buyout firm Francisco Partners Management LLC and the new private equity arm of hedge fund Elliott Management Corp., streamlining the company ahead of its planned merger with EMC Corp.

The sale of the unit, which is focused on advanced analytics, database management and data protection, will help Dell make good on its commitment to shed non-core assets as it nears completion of its $67 billion purchase of EMC. Terms weren’t provided in the statement released Monday.

Francisco and Elliott are paying slightly more than $2 billion for Dell’s software assets, according to two people familiar with the situation. The competitive auction included private equity firm Thoma Bravo, said the people, who asked not to be identified because the information is private. Quest Software and SonicWall are among the software assets being acquired, and both were bought by Dell in 2012, the year before the computer maker was taken private. Thoma Bravo sold security-software company SonicWall to Dell.

A representative of Thoma Bravo declined to comment.

EMC Deal

Chief Executive Officer and founder Michael Dell agreed to buy EMC in October to broaden the company’s product lineup from servers to storage devices amid intensifying competition.

Dell, which has said it will add about $50 billion in debt to get the EMC deal done, expects the purchase to close between June and October, people familiar with the matter have said. Dell finished raising all of the cash it needs for the EMC purchase a few weeks ago when it sold $3.25 billion of junk bonds, coming after a $20 billion offering of investment-grade debt.

The sale of the software group is Dell’s latest ahead of its combination with EMC and as it pushes its transformation since its own buyout in 2013.

NTT Data Corp., a unit of Japan’s former telephone monopoly, agreed to buy Dell’s information-technology services businesses for $3.06 billion in March. A month later, Dell took its cybersecurity company SecureWorks Corp. public, raising $112 million. EMC has also sought to sell its Documentum business as part of a plan with Dell to divest more than $6 billion in assets.

Debt financing for the latest transaction was provided by Credit Suisse Group AG and RBC Capital Markets, according to the statement.

Evergreen Coast

Monday’s announcement marks the deal debut of Evergreen Coast Capital Corp., Elliott’s new private equity arm established in Silicon Valley’s Menlo Park over the past year. The tech-focused effort is overseen by Jesse Cohn, who heads Elliott’s U.S. activist investing, and Evergreen Coast’s Managing Director Isaac Kim, formerly a principal at Golden Gate Capital.

Elliott, led by billionaire Paul Elliott Singer, manages about $28 billion. Activist Cohn had previously pushed EMC to sell itself and spin off VMware, of which the storage company is the majority owner.

Elliott’s shareholder activism campaigns have largely focused on enterprise software and technology hardware companies -- often agitating successfully for a sale.

Elliott’s targeted technology companies that have subsequently sold include EMC, Qlik Technologies Inc., Informatica Corp., Riverbed Technology Inc., BMC Software Inc., Compuware Corp., Novell Inc. and Blue Coat Systems Inc., among others. Cohn has also agitated for changes at technology providers including Citrix Systems Inc., Polycom Inc., Mitel Networks Corp., NetApp Inc. and Juniper Networks Inc.

— With assistance by Michelle Davis, and Brian Womack

(Updates with bid details in third paragraph, Evergreen debut in 10th.)
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