What happened

Shares of Pivotal Software (PVTL) rose 66% as of 11:23 a.m. EDT on Thursday. The enormous one-day jump is a response to the news that VMware (VMW) is in talks to acquire the software development platform.

So what

Dell Technologies (DELL 2.92%), which is a majority owner of VMware, filed a document with the Securities and Exchange Commission today stating that VMware is in talks to acquire Pivotal for $15 per share in cash. That represents a substantial premium to yesterday's closing price of $8.30.

VMware has also requested that Dell Technologies exchange all of its outstanding shares of Class B common stock of Pivotal for shares of Class A common stock of VMware as part of the transaction. Dell Technologies and a VMware special committee are currently in discussions to an agreed-upon exchange ratio.

Businessmen shaking hands and exchanging money

Image source: Getty Images.

Before the transaction can proceed, it would have to be approved by a majority of Pivotal shareholders, not including those that are held by  VMware. It would also have to be approved by a special committee of the board of directors of Pivotal.

Traders bid up shares of Pivotal's beaten-down stock in response to the buyout offer.

Now what

Pivotal has struggled as a stand-alone public company. The share price was recently hit hard after management significantly reduced its full-year guidance, which was a surprise move when considering that it actually beat its earnings expectations. The drop was so bad that Pivotal's stock had fallen more than 40% below its 2018 IPO price.

The funny thing about this buyout is that VMware's offer of $15 per share is exactly the same price that Pivotal's shares came public.

While it isn't uncommon for mergers to come undone before the close, the odds of this deal going through look to be very high. With Pivotal's shares currently trading well below the buyout price, the smart move for shareholders is probably to sit tight and watch the story play out.