Dell’s EMC Corp (EMC) Deal Might Fall Apart Amid Tax Burden: Report

Shares of EMC Corporation (EMC) are under some pressure Tuesday, following a Re/code story that Michael Dell’s ambitious plan to take over the storage giant might fall apart amid tax burden.

Citing sources familiar with the matter, the report says that Dell insiders are worried “the company could end up being on the hook for a tax bill of up to $9 billion following a regulatory review.” The report notes that the worries “stem from Dell’s unusual proposal to use a new type of stock share to help pay for the acquisition. Their concerns are also rooted in EMC’s wildly successful investment in the [virtualisation giant] VMware, Inc (VMW), the value of which has risen by tens of billions of dollars since EMC acquired it in 2003.”

Dell agreed last month to acquire EMC for $67 billion. Under the terms of the deal, Dell has agreed to pay $24.05 cash per share for EMC, and will also give EMC shareholders a special stock that tracks the price of VMWare, Inc. EMC currently owns 80% of VMware.

Midway through trading Tuesday, 6.88 million shares of EMC Corp. have exchanged hands as compared to the name’s average daily volume of 27.34 million shares. The stock, currently down $0.29 at $25.54, has ranged in a price between $25.24 to $25.97 after having opened the day at $25.76.

In the past 52 weeks, shares of Hopkinton, Massachusetts-based company have traded between a low of $22.66 and a high of $30.92.

Shares are down 9.72% year-over-year and 11.94% year-to-date.

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