While Dell has long coveted owning all of VMware, buying the remainder of the company is unlikely, four people said.
One possibility if a spinoff takes place is that VMware could pay Dell a large special dividend by taking on added debt and helping Dell reduce its heavy debt load, two of the people said.
Several of Dell's largest shareholders, including private-equity firm Silver Lake and hedge fund Elliott Management (whose 5.9% ownership in Dell is passive) favor spinning out VMware in September 2021, given the tax efficiencies and simplification to the capital structure, the people said.
Dell, which owns 81% of VMware, plans to explore a variety of strategic options, including a tax-free spinoff of those shares to Dell shareholders in late 2021, according to people familiar with the matter.
VMware, headquartered in Palo Alto, California, has needed to pay top dollar for talent to compete with other cloud-computing companies, while Dell, based in Texas, has a reputation for paying low salaries, three people said.
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