Dell contacts DVMT investors to discuss terms of deal

NEW YORK: Dell Technologies Inc has reached out to investors to determine what it would take to win their support for its plans to return to the public markets, a person familiar with the matter said.

Shareholders, including activist investor Carl Icahn, have balked at the terms of Dell’s proposed deal to take the technology giant public through a US$21.7bil deal involving a tracking stock.

For the first time, Dell is acknowledging to investors in the tracking stock, known as DVMT, that the terms may need to be improved to win the necessary support, said the person, who asked not to be identified because the matter is private.

Talks are at an early stage and it was unclear how Dell planned to improve the offer or whether it would proceed with revising the terms, the person said.

Icahn and other critics argue that the offer undervalues DVMT shares, which were created to track Dell’s stake in software maker VMware Inc. DVMT closed at US$92.10 on Tuesday.

Sweetening its offer would mirror a similar twist in Dell’s move to go private in 2013, when the company improved the terms to gain enough investor support.

P. Schoenfeld Asset Management, which advises clients owning more than US$150mil in DVMT shares, has implored the company to boost its offer by at least 20%.

Dell’s exploratory discussions with investors suggests that the company may be trying to find the minimum bump necessary to win more than 50% of DVMT holder support.

A representative for Dell declined to comment. The company’s discussions with investors were reported earlier by the Wall Street Journal.

Dell executives have called the current offer fair as recently as Oct 16, saying the proposal represented a 29% premium to the DVMT share price immediately prior to the announcement of the transaction. The Round Rock, Texas-based technology giant released the statement after Icahn, who with his affili- ates owns a 9.2% stake according to court records, said he would oppose the deal.

Icahn said the offer valued DVMT at about US$94 a share, based on his calculations. That’s well below the US$144 a share he believes its worth. He has since sued in Delaware Chancery Court to force Dell to open its books related to the offer.

Dell Technologies chief executive officer Michael Dell and Silver Lake Partners are offering US$109 a share for DVMT.

The deal is designed to take Dell Technologies public and to simplify Michael Dell’s tech empire. The company may also pursue a traditional initial public offering.