Dell Boosts Final Offer for Tracking Stock to $120 a Share

(Bloomberg) -- Dell Technologies Inc. boosted an offer to shareholders of its tracking stock, DVMT, to win support for the company’s plan to return to public markets.

Dell’s final offer is for $120 per share in cash and stock, and the maximum amount of cash to be paid out will rise to $14 billion, from $9 billion according to a statement from the Round Rock, Texas-based company. Dell also offered holders of the tracking stock the option of receiving 1.5 to 1.8 shares, depending on how much cash DVMT holders elect to receive and how the stock trades in the the 17 days around the Dec. 11 vote on the matter.

Dell is still ascribing a value of $79.77 to its own shares in the transaction, which has been a point of contention for shareholders who argue it is worth less. The mechanism to adjust the amount of shares allocated in the transaction and the other measures were aimed at alleviating those concerns, according to people familiar with the matter, who asked to not be identified because the matter isn’t public.

The offer implies a total market capitalization of $23.9 billion for DVMT, an additional $2.2 billion in implied value over the previous proposal. DVMT holders will end up owning between 17 percent and 33 percent of Dell Technologies, depending on the final terms.

DVMT’s shares rose less than 1 percent, to $106.07 at 9:44 a.m. in New York trading on Thursday, giving it a market value of about $21.2 billion.

The revised deal comes after some investors balked at Dell’s initial June offer to holders of DVMT, which valued their holdings at $109 a share in cash and Dell stock. Dell reached out to investors earlier this month to determine what it would take to win their support for a return to public markets.

After the revised offer, Dell said an “overwhelming number” of shareholders that it contacted supported the transaction. About 17 percent of DVMT shareholders have agreed to support the transaction, including funds affiliated with Dodge & Cox, Elliott Management Corp., Canyon Partners and Mason Capital Management, according to Dell.

Blackrock, which owns 6.4 percent of DVMT, also supports the transaction but hasn’t signed the agreement due to internal policies, according to people familiar with the matter. Blackrock declined to comment.

Dell believes the investor support it has garnered for the revised deal will help it win necessary support from its broader investor base, the people said.

Activist investor Carl Icahn, who owns a 9.3 percent stake in DVMT, the tracking stock that was created to track Dell’s stake in software maker VMware, has been pushing for better terms of the deal and has said shareholders must also have the right to elect three independent directors to Dell’s board. In its statement Thursday, Dell said holders could elect one independent director starting at 2020 shareholder meeting and the company will nominate one at the 2019 meeting.

Icahn has been the main dissenting voice among holders of the tracking stock, claiming the deal that was originally proposed undervalues the shares that track Dell’s stake in VMware Inc. The billionaire has said he will do “everything in my power” to stop the proposed merger, which would see Dell’s stock traded on the public markets for the first time since 2013.

It’s not the first time Icahn and Dell’s founder have clashed. Icahn also opposed Michael Dell’s efforts to take his namesake company private in 2013 before the founder and Silver Lake increased their offer and got the deal done.

Dell expects the deal to close by the end of 2018. After Dell’s announcement, VMware disclosed in an SEC filing that it has waived certain provisions of its governance agreement with Dell, including with regard to a VMware special dividend declaration.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Molly Schuetz, Tony Robinson

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