August 22, 2019 / 8:38 PM / a month ago

VMware to pay $5 billion for firms offering cloud security, developers platform

(Reuters) - VMware Inc said on Thursday it bought two providers of cloud security and cloud developer services in separate deals valued at about $5 billion, as it expands offerings for corporate clients.

VMware bought Pivotal Software Inc in a $2.7 billion deal. Dell Technologies Inc is the controlling stakeholder of both companies.

Separately, VMware said it would buy software maker Carbon Black Inc for about $2 billion in cash.

VMWare makes cloud computing software, while Pivotal provides tools for software developers working on cloud services. Carbon Black has a cloud security platform that uses big data and behavioral analytics to protect against cyber attacks.

VMware will pay $26 per share for Carbon Black at a premium of 6% over its Thursday close.

Corporations using traditional security products are spending more money and losing more information, VMware Chief Executive Pat Gelsinger said in an interview. “That’s pretty broken,” he said, praising Carbon Black’s platform.

The company expects Carbon Black and Pivotal to meaningfully add to its revenue in the first year after closing the deals by January next year.

Dell had taken Pivotal public last year for $15 per share. Thursday’s Pivotal deal is for a blended price per share of $11.71, in which Class A stockholders will get $15 per share.

Dell’s stake in Pivotal will be exchanged for VMware shares.

The company and its founder Michael Dell owned 131.3 million shares of Pivotal Class B stock, not including the 44.2 million shares held by VMware, according to a regulatory filing.

Pivotal shares rose 9% in extended trading, while those of Carbon Black were up nearly 6%. VMware shares fell 7% and Dell shares shed 3%.

JPMorgan Chase & Co advised VMWare on the two deals. Morgan Stanley advised Carbon Black, as well as the special committee of Pivotal’s board of directors. Lazard Ltd advised the special committee of VMware’s board of directors.

Reporting by Tamara Mathias and Supantha Mukherjee in Bengaluru, Peter Henderson in San Francisco and Greg Roumeliotis in New York; Editing by Bernard Orr and Richard Chang

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