After enlisting investment banks, Dell Technologies is reportedly planning to increase the US$9 billion cash portion of its VMware stock swap deal by a whopping 50 percent in a move to win VMware tracking stock shareholder approval.
Dell might unveil a new deal this week that adds about 50 percent more to the cash portion of its US$21.7 billion deal to buy back its DVMT VMware tracking stock to become a public company, according to the Wall Street Journal, citing people familiar with the matter. Additionally, several news outlets report that Dell is discussing the possibility that representatives of some shareholders could join Dell's board of directors.
Round Rock, Texas-based Dell is currently offering US$109 in cash for each share, not exceeding US$9 billion, with the remainder payable with 1.3665 shares of Dell's Class C common stock. Dell is now working on a new deal for shareholders that increases the cash to US$13.5 billion, according to the WSJ.
New negotiations are underway with shareholders looking for a valuation of between US$120 and US$130 per share, compared to the current offer of US$109. The share ratio and precise valuation could change depending on how Dell's stock does in the market once it starts trading, according to reports.
Dell's DVMT tracking stock is currently trading at US$104.08 per share as of Wednesday afternoon. Dell did not respond for comment by press time.
To become a public company, Dell needs to win more than 50 percent of the DVMT shareholder vote, which would see Dell buy out DVMT stockholders before listing its own shares on the New York Stock Exchange.The vote does not include shares held by affiliates of Dell Technologies such as Michael Del and private equity firm Silver Lake.
Following backlash from some shareholders of the proposed deal, Dell representatives have recently been reaching out to investors to see what changes need to be done to gain their support.
Activist investor Carl Icahn has been extremely vocal about his stance against the proposal, calling it "the Michael Dell/Silver Lake buyout scheme." 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.
Investment firm P. Schoenfeld Asset Management (PSAM), which advises clients that own more than US$150 million shares of DVMT, said it will vote against the proposed transaction because it is "grossly inadequate." The firm said in a letter sent to the Dell board of directors that, "Dell must increase the offered consideration by at least 20 percent to narrow the discount and value the DVMT stock more fairly."
The critical shareholder vote will take place at 11 December during a special meeting of stockholders at Dell's headquarters in Round Rock, Texas.