BlackRock, Other Big Shareholders Have Misgivings About Dell Deal for DVMT, Sources Say -- Update
July 10 2018 - 2:28PM
Dow Jones News
By Cara Lombardo
Several major stockholders of an affiliate of Dell Technologies
Inc. have misgivings about a bid to buy them out, potentially
complicating the PC and data-storage giant's plan to return to the
public markets.
Holders of at least 10% of DVMT shares, which track Dell's
controlling stake in VMware Inc., are disappointed with terms of
the deal announced last week and may oppose it, according to people
familiar with the matter. The holders include several teams at
investing giant BlackRock Inc., as well as Farallon Capital
Management LLC and Canyon Capital Advisors LLC. BlackRock is DVMT's
third-largest shareholder with a 4.8% stake, while Farallon and
Canyon own about 3.5% and 1.5%, respectively, according to
FactSet.
The dissatisfied shareholders' chief complaint, according to the
people: The deal undervalues the tracking stock, created to help
finance Dell's $67 billion purchase of EMC in 2016.
DVMT stockholders are being offered about $109 a share, a
roughly 29% premium over the price before the deal was announced.
DVMT shares have been trading at a sizable discount to the VMware
shares they are meant to track and several of the shareholders
believe the offer should go further toward closing it. A deal at
about $120 a share would still represent a roughly 20%
discount.
Elliott Management Corp., the fourth-largest DVMT holder with a
roughly 4% stake, is still reviewing the deal and hasn't decided
whether to support it, people familiar with the matter said. The
activist hedge fund, a former EMC shareholder that supported the
creation of the tracking stock, had been hoping Dell would strike a
more comprehensive deal including a full purchase of VMware
itself.
A spokesman for Dell directors representing tracking-stock
holders pointed to a statement last week that the committee
evaluated several alternatives and decided the proposed deal is the
best option to maximize value.
Dell is offering DVMT investors cash and stock. Swapping shares
of closely held Dell for those of DVMT as part of the $21.7 billion
transaction would result in a public listing for the PC pioneer
five years after it went private in a leveraged buyout with
private-equity firm Silver Lake.
The DVMT deal requires sign-off from holders of a majority of
the public shares at a vote planned for October. Withheld votes
count as "no" and given the typical proportion of shareholders who
don't vote in such elections, opposition from as little as 30% of
shares could jeopardize the deal.
If shareholders vote the deal down, Dell would have to go back
to the drawing board on a proposal that would simplify its
structure and give the company a public currency that could be used
for acquisitions and to raise cash. A more comprehensive deal
proved infeasible in part because of resistance from VMware.
There is no guarantee any of the investors will ultimately vote
no; Dell is meeting with shareholders now to try to gain their
support, the people said.
Vanguard Group, DVMT's largest shareholder with a roughly 9%
stake according to FactSet, declined to comment on whether it
supports the deal, as did Dodge & Cox, the second-largest.
Activist investor Carl Icahn, who amassed undisclosed stakes in
both DVMT and VMware in recent months, is content with a roughly
$200 million profit he has already made and is unlikely to push
Dell to sweeten the deal, The Wall Street Journal reported last
week. But the billionaire hadn't completely ruled out opposing
it.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
July 10, 2018 14:13 ET (18:13 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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