Stock Traders Daily Rates EMC Corporation (NYSE:EMC) a Strong Buy
The question is not if Dell's offer for EMC Corporation (NYSE:EMC) is a good offer, the question is if it is good enough.
EMC board members have expressed opinions that suggest the fair breakup value of EMC is between $35-$38 per share, and Dell is offering $24.15 in cash + a VMware, Inc. (NYSE:VMW) Tracking Stock worth $9.10 for a total value of $33.25.
Importantly, as this article was being typed, EMC shares were trading at $28.
Clearly, both the Dell buyout offer and the estimated breakup value that some EMC board members are discussing are both materially higher than $28.
The question is therefore not one of relative value, but instead an interpretation of the EMC Board's relative apprehension to taking anything less than what they might consider fair value.
In our opinion, $24.15 + a VM Ware tracking stock is about as close to fair value as they are going to get, and even if they held out for the best possible deal it still would only be marginally better if at all.
The Dell - EMC deal is a big win for everyone.
The EMC Board will come around.
EMC is a very strong buy near $28, but be patient.
Disclaimer: You can lose money in the stock market. Consult your advisers. Stock Traders Daily may have recommended EMC to clients and Stock Traders Daily's management owned shares of EMC at the time this was written. Stock Traders Daily will continue to update clients about the happenings involved here as the situation progresses. We will not be publicly disclosing any additional opinion but instead reserving those for subscribers and clients.