VMworld 2019: Will VMware Acquire Pivotal?

This week we're getting a bit of a suggestion of what to expect during the VMWorld 2019 keynote on August 26 -- if VMware's shopping plans go off without a hitch. On Wednesday, VMware confirmed through a statement to investors that it's in talks with San Francisco-based Pivotal to purchase all of the Cloud Foundry focused company's outstanding shares. If the deal bears fruit, it's a dollars to doughnuts bet that it will be front and center during VMworld's opening day keynotes.

If the deal closes, which seems likely but not a certainty, this will be a homecoming for Pivotal that's akin to moving back in with the parents.

Pivotal began life in 2012, when it was spun out of EMC (now DellEMC) and VMware to focus on Cloud Foundry, the open-source cloud application platform for developing and deploying enterprise cloud applications. Pivotal Cloud Foundry, a proprietary implementation of the open-source software, is the company's flagship product, along with Pivotal Container Service, its Kubernetes platform.

Indeed, this return home would be quite chummy, if not incestuous. Dell Technologies owns the majority of both VMware and Pivotal, with VMware also holding Pivotal stock and selling Pivotal services. In addition, the trio of DellEMC, VMware and Pivotal comprise half of the Cloud Foundry Foundation's top-tier platinum membership, which also includes IBM, SAP and SUSE.

In its statement for investors, VMware said it will make no more comments on the negotiations "unless and until a definitive agreement is reached." The same is likely true from Pivotal, since SEC regulators frown on speculative remarks from companies that might affect their stock value. If a deal is cut, we probably won't hear about it until it become's a centerpiece at VMworld 2019's opening presentations.

According to a press release from Pivotal, talks are centering around VMware acquiring all outstanding Pivotal Class A stock for $15 per share, which is nearly double the price at the time the announcement was made, although the price has risen considerably since then.

Interestingly, $15 was the opening trading price in Pivotal’s IPO in April 2018, but the stock has since struggled to maintain value. In June, Pivotal reported a net loss of $31.7 million for the first quarter of fiscal 2020, which ended on May 3