VMW Vmware Inc

By Cara Lombardo 

Carl Icahn is gearing up for another battle with Michael Dell.

The activist investor, who fought Mr. Dell when he took his namesake computer company private in 2013, will challenge plans to take it public again.

Mr. Icahn on Monday disclosed that he has boosted his stake in shares that track Dell Technologies Inc.'s interest in VMware Inc. to 8.3%. He said in a letter that he plans to vote against Dell Technologies' plan to buy the stock -- known by its ticker, DVMT -- and encourage other shareholders to do the same.

The move represents a serious challenge to a deal that is meant to streamline Dell's complicated ownership structure and return the company to the public markets. Several other investors are already unhappy with the proposal, which Dell and investment firm Silver Lake announced in July, and Mr. Icahn's public opposition lengthens the odds of winning shareholder approval.

Mr. Icahn argues that the current deal, which would allow tracking-stock holders to exchange each share for 1.3665 shares of what will become a newly public Dell, or $109 in cash, significantly undervalues DVMT stock.

"I firmly believe Dell and Silver Lake are trying to capture $11 billion of value that rightly belongs to us," he said in an open letter to other shareholders. Mr. Icahn said he believes DVMT is worth approximately $144 a share, based on recent DVMT and VMware share prices. It currently trades at about $94.50.

The special committee of Dell's board representing DVMT shareholders previously said it examined several alternatives and determined the current offer maximizes value.

The deal has been unpopular with shareholders since it was announced. Holders of around 20% of DVMT -- including Mr. Icahn, fellow activist Elliott Management Corp., some teams at BlackRock Inc. and others -- were already considering rejecting it, The Wall Street Journal previously reported.

While Mr. Icahn didn't initially intend to challenge the deal, his plans changed as more investors voiced concerns privately to him, no other large shareholder came forward and he did more research, according to people familiar with the matter.

He recently boosted his position from 1.2%.

P. Schoenfeld Asset Management LP, which owns a much smaller DVMT stake, said in a letter made public Oct. 5 that the consideration should be increased by 20%. Mr. Icahn would be unlikely to support a deal even at that price, the people said.

Mr. Icahn also said in his letter he is considering making a competing partial bid to buy DVMT shares, should some holders want to cash out at a lower price than he feels is fair.

Dell, which has been meeting with investors in an effort to sell the deal, has said its offer is final. As shareholder dissatisfaction simmered, Dell interviewed several banks about the possibility of a straight initial public offering, which it saw as a backup option should the current deal fail, the Journal reported last month. But Mr. Icahn and other DVMT shareholders have dismissed it as an empty threat.

Once the largest personal-computer maker, Dell is now known as much for its corporate products such as storage, servers and security software. Its majority stake in VMware is seen as its most promising asset.

DVMT was created to help finance Dell's 2016 purchase of storage pioneer EMC. Dell went private in a roughly $25 billion leveraged buyout in 2013 by Mr. Dell and Silver Lake.

In Mr. Icahn's several-month clash with Dell at the time, the buyout group eventually marginally increased the price and added a dividend, prompting Mr. Icahn to relent.

In his letter Monday, Mr. Icahn said he doesn't expect a fast resolution. "I intend to do everything in my power to stop this proposed DVMT merger," he wrote.

Write to Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

October 15, 2018 06:23 ET (10:23 GMT)

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