Dell Upgrades Ante in Return to Trading -- WSJ

By Cara Lombardo and Dana Cimilluca 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 15, 2018).

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 -- 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.

DVMT shares jumped 4% Wednesday to close at a record high of $105.69 after The Wall Street Journal reported on the new offer.

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 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 [e-mail] and Dana Cimilluca at [e-mail]

(END) Dow Jones Newswires

November 15, 2018 02:47 ET (07:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.