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Dell Technologies strengthened its bid to buy back a tracking stock issued in 2016, gaining investor support that blocked the PC maker's complex plan for its return to the US market.
The technology group led by billionaire Michael Dell made the changes after struggling to gain support for its initial offering of $ 21.7 billion in July, under which shareholders of the tracking group, DVMT, would exchange their holdings for shares and shares in a recently reorganized Dell company.
On Thursday, the group announced it had reached an agreement with several shareholders of DVMT to increase the cash tranche of the bid from $ 9 billion to $ 14 billion and to overcome the disagreements over the value of the tranche in shares. He put $ 23.9 billion on his new offer.
The agreement, the result of several weeks of negotiations with asset managers holding a 17% stake in DVMT, including Dodge & Cox, Elliott Management, Canyon Partners and Mason Capital, sets a reference price of 120 USD. per share DVMT, 11 USD more than the previous offer. That's $ 70 per share in cash and 1.5 to 1.8 Dell shares.
Dell, which supplies desktops and laptops to companies around the world, said the new terms provided "certainty of value" to shareholders.
Increased disbursements will increase the debt burden on Dell's balance sheet. A person familiar with the offer said that Dell had already approached S & P Global, Moody's and Fitch – the three major US credit rating agencies – and that it had been assured that its rating would not be further degraded in the waste market.
A significant hurdle faced by Dell in its shareholder negotiations was the determination of the true value of its offer. Although the Company was required to disclose financial information since its acquisition of the EMC storage manufacturer in 2016, the Group's repurchase of the Group by Dell and the private equity group Silver Lake in 2013 meant that its own shares have not been publicly traded for years.
DVMT aims to track the value of Dell's participation in the VMware software group, but given the stock conversion plan, it can also be considered a proxy of Dell's value itself.
As part of the revised offer, Dell has not set a fixed trading ratio for the equity portion of the transaction. The number of new "Class C" Dell shares to be distributed will be determined based on the exchange of DVMT shares over a 17-day period in November and December. It will be between 1.5043 new shares and 1.8130 shares. The lower the DVMT transactions, the higher the number of Dell shares investors are entitled to.
The new agreement is also supported by BlackRock, the largest institutional investor in DVMT, according to people familiar with its thinking. With the support of key investors, Dell and his private equity partner, Silver Lake, will be able to take Dell back to the public market five years after their privatization in a contentious buyout. .
Jesse Cohn, a partner at Elliott, said that under the new terms, the proposed acquisition of follow-up shares would give shareholders greater value. Elliott had strongly opposed the earlier offer from Dell.
"We believe that this transaction represents a favorable outcome for all [DVMT] shareholders, who will benefit from greater value certainty through the increased cash component and protection against the downside risk of Class C common shares, "said Mr. Cohn.
He added, "By simplifying Dell's capital structure, this transaction provides a clear path for [DVMT] the shareholders to participate alongside Michael Dell and Silver Lake in what we believe to be a substantial value creation for the shareholders of Dell Technologies in the long run. "
Shareholders will have their say in a vote on Dec. 11, following a bitter dispute that has lasted for months between the company and activist investors, including Elliott and Carl Icahn. Mr Icahn had accused Mr Dell and Silver Lake of missing investors in their previous offer.
On Wednesday night, Mr Icahn said that DVMT investors should lobby for the right to elect at least three members of the board of directors in order to keep Mr Dell and Silver Lake under control once the company is in control. agreement reached. The activist investor has not been included in recent negotiations with Dell.
In its Thursday proposal, Dell agreed to allow the shareholders of DVMT who hold new class C shares to elect a single director as of its 2020 annual general meeting.
Dell has received commitments from Barclays, Bank of America, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, RBC and UBS to grant a debt of up to $ 5 billion to fund its increased cash offer.
The DVMT tracking stock was little changed Thursday at $ 106, while VMware shares rose 3%.
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