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 $21.7 billion 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 will 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 $92.10.
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 $150 million in DVMT shares, has implored the company to boost its offer by at least 20 percent.
Dell’s exploratory discussions with investors suggests that the company may be trying to find the minimum bump necessary to win more than 50 percent 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 October 16, saying the proposal represents a 29 percent 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 affiliates owns a 9.2 percent stake according to court records, said he would oppose the deal.
Icahn said the offer values DVMT at about $94 a share, based on his calculations. That’s well below the $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.