Dell Sweetens Tracking-Stock Deal After Facing Shareholder Pressure

By Micah Maidenberg 

Dell Technologies Inc. confirmed it is raising its offer to buy out an affiliate, a move that comes after the company faced pressure from large investors to sweeten the bid.

The PC maker and data-storage company said Thursday it will offer owners of DVMT, which tracks the value of Dell's stake in software maker VMware Inc., $120 a share, up from the original $109-a-share offer. Dell increased the cash portion of the deal by $5 billion to $14 billion and modified the ratio of shares in Dell owners of DVMT would receive.

In 2015, Dell set up the tracking in order to help it finance its takeover of EMC, the company that owned, at that time, the majority of VMware. Tracking stocks allow companies to expose specific business units to public markets, potentially increasing their visibility and value.

Dell said that sweetened offer increases the value DVMT shareholders would receive in the deal -- initially valued at about $22 billion -- by about $2.2 billion. Putting more cash on the table will increase the "certainty of value" for shareholders in DVMT, Dell said in a statement.

The Wall Street Journal reported Wednesday that Dell planned to increase its offer.

The purchase of the tracking stock would help return Dell to public markets.

Dell said new the proposal has support from key owners of DVMT, some of whom were considering voting against the company's initial offer at a special vote scheduled for Dec. 11.

The company said Dodge & Cox, Elliott Management, Canyon Partners and Mason Capital Management had all signed binding agreements to support the higher bid. Together, those shareholders own 17% of DVMT.

Round Rock, Texas-based Dell expects the current owners of DVMT to own between 17% to 33% of the new publicly traded Dell, depending on cash and stock elections.

The company also agreed to allow owners of the future publicly traded Dell shares to elect an independent member to the company's board.

Activist investor Carl Icahn, who owns a 9.3% stake in DVMT, on Wednesday said in a statement that future owners of the publicly traded Dell should have the right to elect at least three independent directors to the company's board.

It isn't immediately clear whether Mr. Icahn will support the new proposal but it is expected to have adequate support.

Write to Micah Maidenberg at [e-mail]

(END) Dow Jones Newswires

November 15, 2018 09:10 ET (14:10 GMT)

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