Michael Dell On New Dell VMware Tracking Stock Deal: 'We Put Forward A Very Attractive Offer'


Dell Technologies says an "overwhelming number" of shareholders support the company's new offer of $120 per share in cash and stock of up to $14 billion in its bid to become public through a VMware stock swap.

"We put forward a very attractive offer and look forward to the stockholder vote," said Michael Dell, chairman and CEO of Dell Technologies in statement on Thursday. "We're excited about the opportunity ahead for Dell Technologies and we're excited to share that opportunity with our public investors."

Under Dell's original terms set earlier this year, shareholders of the DVMT tracking stock would exchange each share of DVMT VMware tracking stock for 1.3665 shares of Dell Technologies Class C common stock, or $109 per share, not exceeding $9 billion. After weeks of negotiations with shareholders, the new terms are that DVMT shareholders would exchange each share for between 1.5043 to 1.8130 of Class C shares, or $120 per share, not exceeding $14 billion – a $5 billion increase to the original deal.

[Related: Carl Icahn Ups Attack On Dell's Public Bid, Says VMware Shares Are Worth $300]

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"An overwhelming number of shareholders contacted by Dell Technologies supported the revised transaction," said Dell Technologies in a statement.

The company said it has gained binding agreements to vote in favor of the new offer from investors Elliott Management, Dodge & Cox, Canyon Partners and Mason Capital Management, who collectively owned approximately 17 percent of the total outstanding Class V common stock.

"We believe this transaction represents a favorable outcome for all Class V stockholders, who will receive greater value certainty through the increased cash component and downside protection on the value of the Class C common stock," Jesse Cohn, a partner at Elliott Management, said in a statement. "By simplifying Dell's capital structure, this transaction provides a clear path for Class V stockholders to participate alongside Michael Dell and Silver Lake in what we believe will be substantial stockholder value creation at Dell Technologies over the long term."

If approved, shareholders will own between 17 percent to 33 percent of Dell Technologies depending on the amount of cash and stock elections and the final exchange ratio, according to Dell.

However, Dell’s current largest shareholder is activist investor Carl Icahn who has yet to weigh-in on the new official deal as of Thursday. Icahn, who is suing Dell over the deal, owns a 9.3 percent stake in DVMT tracking stock and 2.27 million shares in VMware.

"If Dell's deal is allowed to happen, instead of owning credible and highly desirable VMware, we will own vastly inferior and over-levered Dell," said Icahn in a 20-page document to shareholders this month. "Unlike the decaying business of PC hardware, VMware is at the forefront of the rapidly growing cloud infrastructure and business mobility software space. … Based on IBM's recent offer for Red Hat, a deal we should have a comparable valuation to a future VMware deal, VMW should be worth $300 per share."

Icahn did not respond for comment on the new deal as of press time.

Dell received commitments to provide up to $5 billion of debt financing for the new deal from investment banks Barclays, BofA Merrill Lynch, Citi, Credit Suisse, Deutsche Bank Securities Inc., affiliates of Goldman, Sachs & Co., J.P. Morgan, Morgan Stanley & Co. LLC, RBC Capital Markets and UBS Investment Bank.

Dell's DVMT tracking stock was trading at $106.06 per share as of Thursday afternoon.

The critical shareholder vote will take place at 8 a.m. central time on Dec. 11 during a special meeting of stockholders at Dell's headquarters in Round Rock, Texas.