Dell Technologies to Sweeten Deal for DVMT Tracking Shares--3rd Update
November 14 2018 - 4:38PM
Dow Jones News
By Cara Lombardo and Dana Cimilluca
Dell Technologies Inc. plans to sweeten a $22 billion deal to
buy out an affiliate and return to the public markets, according to
people familiar with the matter -- five months after the PC and
data-storage giant's initial proposal sparked intense shareholder
opposition.
Under the new deal, which could be announced as soon as this
week, shareholders of the affiliate, known as DVMT, would receive
cash and stock worth more than the current $109-a-share price, the
people said. Exactly how much will depend on how DVMT shares trade
in a future period. Dell also will increase the $9 billion cash
portion of the deal by about 50%, the people said.
Shareholders of DVMT, which is meant to track Dell's stake in
the fast-growing VMware Inc. software unit, may also receive a seat
on the newly public Dell's board, they said.
It is still possible, as always, that the deal could fall apart
at the last minute. Assuming it goes forward as expected, it would
salvage Dell's effort to streamline its complicated structure and
return to the public markets without conducting a traditional
initial public offering.
The new offer -- which the people expect to garner sufficient
support in a shareholder vote as soon as next month -- comes a week
after The Wall Street Journal reported that Dell was talking to
significant holders about what they would need in a revised
deal.
Dell initially proposed to exchange each DVMT share for 1.3665
shares of what would become the newly public Dell, or $109 in cash.
The company had previously said that offer was "fair and in the
best interests of DVMT shareholders," and final.
But the offer, announced in July, met opposition from big
holders of the tracking shares including activist investor Carl
Icahn, some teams at BlackRock Inc., Elliott Management Corp. and
Dodge & Cox, all of whom were among those considering voting no
in a Dec. 11 vote.
That opposition ratcheted up significantly when Mr. Icahn, who
owns about a 9.3% DVMT stake, began publicly lobbying against the
deal last month. Then two weeks ago, he sued Dell in Delaware
Chancery Court, accusing it of withholding information about the
deal.
Mr. Icahn said in a statement Wednesday that owners of Class C
stock, which DVMT shareholders would receive in a deal, must have
the right to appoint at least three independent directors. "Without
this corporate governance, we believe the rumored offer will be
worth far less than its headline price," he said.
Shareholders' chief complaint has been that Dell was
overestimating the value of its shares--and thus underestimating
the value of DVMT stock.
Facing such concern, Dell this fall explored a straight initial
public offering instead, but ultimately opted to negotiate an
enhanced version of the initial offer.
DVMT was created to help finance Dell's 2016 purchase of storage
pioneer EMC. Dell itself went private in a roughly $25 billion
leveraged buyout in 2013 by founder Michael Dell and
investment-firm Silver Lake, the main drivers behind the current
proposal.
Mr. Icahn also fought Mr. Dell over the 2013 deal, though he
eventually backed down when the buyout group marginally increased
the price and added a dividend.
Write to Cara Lombardo at cara.lombardo@wsj.com and Dana
Cimilluca at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
November 14, 2018 16:23 ET (21:23 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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