WHEN: Today, Thursday, October 8th
WHERE: CNBC's "Squawk on the Street"
Following is the unofficial transcript of breaking news from CNBC's David Faber.
All references must be sourced to CNBC.
DAVID FABER: NOW, LET'S GET TO A POTENTIAL DEAL THAT IS BEING WORKED ON THAT COULD BE, I WOULD ARGUE ONE OF THE LARGEST LEVERAGE BUYOUTS OF ALL TIME. LET ME GIVE YOU THE DETAILS AS I KNOW THEM AT THIS POINT HAVING SPOKEN TO PEOPLE FAMILIAR WITH THE SITUATION. EMC AND DELL ARE IN TALKS FOR A DEAL UNDER WHICH DELL WOULD ACQUIRE EMC AT A PRICE ABOVE $27 A SHARE. HOWEVER, I DON'T HAVE ANY MORE DETAILS ON PRICE, EXCEPT THAT IT WOULD BE ABOVE $27 A SHARE. AND IT WOULD BE A PURCHASE OF THE ENTIRE COMPANY. IN OTHER WORDS, NOT A PUBLIC – NOT A WAY TO USE – TO GET DELL PUBLIC AGAIN BY ISSUING SHARES, BUT ESSENTIALLY A LEVERAGE BUYOUT COUNTING ON THE DEBT MARKETS TO FINANCE A HUGE PURCHASE OF EMC, ALONG WITH ITS 83% STAKE IN VMWARE.
JIM CRAMER: WITH IT.
FABER: HOWEVER, THERE WOULD BE MORE OF A STUB LEFT OF VMWARE OUT IN SOME FASHION. AND JIM, IT ALWAYS BECOMES DIFFICULT GIVEN THE CONVERSATIONS I CAN HAVE WITH PEOPLE WHO ARE WORKING ON SOMETHING TO GET MANY OF THE DETAILS AND ON THIS, I HAVE TO ADMIT, I AM NOT EXACTLY SURE HOW THAT WOULD WORK. THERE IS CURRENTLY A 17% PUBLIC STUB OF VMWARE, RIGHT? EMC OWNS 83% OF THAT COMPANY. BUT HERE IS WHAT I KNOW. I KNOW THAT DELL WANTS TO MAINTAIN CONTROL OF VMWARE. SO WHILE THERE MIGHT BE MORE SOLD INTO THE PUBLIC MARKET, IT WOULD NOT BE A WHOLESALE SALE OF THE VMWARE STAKE OR A SPIN TO SHAREHOLDERS OR ANYTHING LIKE THAT. KEY TO THE REASON DELL WANTS TO OWN THIS IS TO ALSO TO CONTROL VMWARE. NOW, YOU MAY STEP BACK AND SAY OKAY, LET ME JUST TRY AND UNDERSTAND THIS, OF COURSE. DELL WAS ITSELF A LEVERAGE BUYOUT A COUPLE OF YEARS AGO. STILL HAS ENORMOUS AMOUNT OF DEBT. WHAT? $11 BILLION IN DEBT ON IT'S OWN BALANCE SHEET AND WOULD HAVE TO GO OUT AND BUY EMC. WOULD COST AT LEAST WHAT? $50 BILLION. NOW, THERE IS A LOT OF CASH AT EMC, BUT YEAH, YOU ARE RIGHT. WE ARE TALKING ABOUT THEM HAVING TO ACCESS THE DEBT MARKETS, THE BEST I CAN TELL AT THIS POINT, FOR SOMETHING ALONG THE LINES OF AT LEAST $40 BILLION. AND GIVEN WHAT HAS BEEN GOING ON IN THE HIGH YIELD MARKET, YOU MIGHT BE RIGHT TO ASK, WELL HOW CAN THEY GET THAT DONE? UNDERSTANDING I HAVE IS IT WOULD NOT JUST BE A HIGH-YIELD OFFERING. THERE IS A WAY TO DO HYBRID INVESTMENT GRADE HIGH YIELD AND IN FACT, THIS WOULD BE SOMETHING THAT COMES INTO PLAY WHEN DELL DOES ACCESS THOSE CAPITAL MARKETS. AND IN FACT, A LOT OF THIS LEAKED OUT BECAUSE THEY ALREADY ARE HAVING THOSE TALKS WITH BANKS ABOUT THAT FINANCING, JIM. I'M TOLD THIS DEAL COULD BE AS LITTLE AS ONE WEEK AWAY. ALTHOUGH, THE CREDIT MARKETS HAVE TO COME INTO PLAY HERE, AGAIN, EVEN WITH A HYBRID STRUCTURE AND I'M NOT QUITE SURE HOW THAT WORKS, INVESTMENT GRADE AND HIGH YIELD. WE ARE TALKING ABOUT A HUGE NUMBER. BUT THEY BORROW ENORMOUS AMOUNTS. MICHAEL DELL AND SILVER LAKE PUT IN NEW EQUITY. THEY BUY EMC. THEY MAINTAIN CONTROL OF VMWARE. AND THAT IS THE DEAL AT LEAST ABOVE $27 A SHARE, BUT WHILE I'M TOLD PRICE IS LARGELY DEALT WITH, I DON'T KNOW WHAT IT IS.
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