Tech

EMC wants 'go shop' provision in Dell deal: Sources

EMC asks for Go Shop provision in merger with Dell
VIDEO0:2900:29
EMC asks for Go Shop provision in merger with Dell

EMC, the data storage company that is preparing to unveil an agreement to be acquired by personal computer maker Dell as early as Monday, is also planning to seek out other suitors, according to people familiar with the matter.

EMC has asked for a 'go-shop' provision to be included in the merger agreement that will allow it to solicit bids from other parties and pay a discounted breakup fee to Dell if there is a deal with another company, the people said.

Such a clause, though not unusual in merger agreements, shows how EMC Chief Executive Joseph Tucci is preparing to exhaust all arguments to convince the company's shareholders that a deal with Dell is the best possible outcome for them.

While IBM, Cisco Systems and Hewlett-Packard could theoretically be potential suitors for EMC, which has a market capitalization of $53.6 billion, the chances of them challenging Dell with a rival offer are slim, the people said.


What to expect from Dell's EMC offer
VIDEO2:1102:11
What to expect from Dell's EMC offer

The negotiations between Dell and EMC, as well as talks with banks about securing the necessary debt financing, continued on Sunday, and the two sides hope to unveil an agreement on Monday or Tuesday, one of the people added.

The sources asked not to be identified because the negotiations are confidential. EMC, Dell, IBM, Cisco and Hewlett-Packard did not immediately respond to requests for comment.

The acquisition of EMC, which would be the largest technology sector deal on record, would help Dell diversify away from the stagnant personal computer market and give it the scale to attack the faster-growing and more lucrative market for managing and storing data for businesses.

Dell is planning to pay for most of the deal with cash, though it will also give EMC shareholders a special stock that tracks the market value of VMWare, the virtualization software company majority-owned by EMC, people familiar with the matter have previously said.

Read MoreComputing rivals Dell, EMC in deal talks

A go-shop provision is not without risks for the acquirer. In the case of Dell's acquisition by its founder Michael Dell and private equity firm Silver Lake in 2013, the go-shop clause allowed activist investor Carl Icahn and private equity firm Blackstone Group to submit rival offers.

While Michael Dell's consortium prevailed, pressure from Icahn and other Dell shareholders resulted in the acquisition price being sweetened by more than $350 million to $24.9 billion.

EMC already has a prominent activist, Elliott Management, among its shareholders. Elliott could push for a sweetened bid if it is unhappy with the price.