VMware In Talks To Acquire Pivotal Software

The Cloud Foundry leader spun out of VMware and EMC several years ago. Now it may be reunited with the virtualization kingpin at a premium of 80 percent of its current share price.

Pivotal Software spun out of VMware years ago, but now it looks like it might be reunited with the virtualization leader.

The two companies, both largely owned by Dell Technologies, have representatives discussing an acquisition at $15 per share—an 80 percent premium on Pivotal's stock price at the close of trading on Wednesday.

Palo Alto, Calif.-based VMware and San Francisco-based Pivotal, along with Dell Technologies, jointly filed a document with the SEC on Wednesday informing government regulators of the potential transaction.

[Related: 10 Things You Need To Know About Pivotal's IPO]

Special committees of the boards of VMware and Pivotal "are proceeding to negotiate definitive agreements with respect to a transaction to acquire all of the outstanding shares of Class A common stock of Pivotal for cash at a per share price equal to $15.00," reads the Schedule 13D SEC document.

"VMware regularly evaluates potential partnerships and acquisitions that would accelerate our strategy," the company said in a statement.

"Pivotal is a long-term strategic partner and we’re already successfully collaborating to help enterprises in their application development and infrastructure transformation."

Besides Dell, other Pivotal shareholders include Ford and Microsoft. GE, an initial stakeholder, sold off its shares this year.

Pivotal, the leading provider of the Cloud Foundry platform to enterprises, enjoyed a successful IPO in April of 2018, debuting on the New York Stock Exchange at $16.75 for a $3.9 billion valuation.

But after some positive months, the share price plummeted in June after the company disappointed with first quarter earnings results. The stock closed Wednesday at $8.30, but surged nearly 70 percent in after-hours trading.

"There can be no assurance that any such agreement regarding the potential transaction will occur, and VMware does not intend to communicate further on this matter unless and until a definitive agreement is reached," the VMware statement reads.

The Pivotal Initiative started in 2013 as a joint venture of EMC and VMware to address the big data and cloud platform market.

Dell later acquired EMC, which also was VMware's major shareholder.

Pivotal launched as a standalone company with six primary components: EMC's Greenplum big data platform and its Cetas data analytics software; VMware's GemFire high-speed application ingestion software, its Spring platform for integrating legacy data and its Cloud Foundry cloud-independent application automation technology; and Pivotal Labs and its application development team.

The company is the primary backer of the open source Cloud Foundry project.