Dell sweetens VMWare tracking stock offer to $120 per share

(Reuters) – Dell Technologies on Thursday raised its offer to buy back shares tied to its interest in software maker VMWare (DVMT.N) to $120 per share from its previous offer of $109, still way short of the $300 price suggested by activist investor Carl Icahn.

A logo of Dell Technologies is seen at the Mobile World Congress in Barcelona, Spain February 28, 2018. REUTERS/Yves Herman

The computer maker in July offered to pay $21.7 billion in cash and stock to buy back shares tied to its interest in VMware, returning the computer maker to the stock market without an initial public offering.

Hedge fund manager Icahn, who owned a 9.3 percent stake in Dell, had opposed the deal calling it a “conflicted transaction that benefits the controlling stockholders, at the expense of the DVMT stockholders”.

Icahn sued Dell earlier this month and had said VMWare should be worth $300 per share.

In its previous offer, Dell had offered to exchange each share of VMware tracking stock for 1.3665 shares of its Class C common stock with cash consideration of not more than $9 billion.

The current offer equates to 1.5043-1.8130 Class C shares with a cash component of up to $14 billion.

Icahn did not immediately respond to requests for comment.

The tracking stock is tied to an 81 percent economic stake in software company VMware. The transaction will allow Dell to bypass the traditional IPO process, which would likely have involved grilling by stock market investors over Dell’s $52.7 billion debt pile.

The cash part of the increased offer price Dell will be funded by new debt of up to $5 billion, the company said in a statement.

Reuters reported on Tuesday that Dell was working with investment banks to add more cash to its buy back offer.

Reporting by Vibhuti Sharma in Bengaluru; Editing by Saumyadeb Chakrabarty

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