10/22/2018
Dell to Interview Banks for IPO in Lieu of Tracking-Stock Acquisition - WSJ
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DEALS
Dell to Interview Banks for IPO in Lieu of
Tracking-Stock Acquisition
Initial public o ering is seen as backup plan if DVMT deal falls through
Dell Technologies founder and CEO Michael Dell at the New York Stock Exchange in July. PHOTO: RICHARD
DREW ASSOCIATED PRESS
By Cara Lombardo and Dana Cimilluca
Sept. 23, 2018 3 16 p.m. ET
Dell Technologies Inc. is exploring the possibility of launching a traditional IPO instead of going
public through a proposed acquisition that has met resistance from several investors.
The PC and storage giant plans to interview several banks for underwriting roles in an IPO this
week, according to people familiar with the matter. As a result, it has postponed by about a
week a roadshow to sell the takeover deal that was to begin this week, the people said.
Dell would be one of the largest U.S. companies to launch an IPO. It is far from certain that it will
ultimately do so, however, and interviewing banks could be seen as a tactic to put pressure on
investors to support the current deal.
Either way, the move is a sign tensions are rising between Dell and investors who argue that the
takeover deal undervalues its Class V stock. Known as DVMT, that stock was created to track
Dell’s controlling stake in VMware Inc., a fast-growing provider of cloud-infrastructure
services.
Acquiring DVMT would allow Dell to go public by swapping its shares for the tracking stock.
DVMT holders would receive cash too, for total consideration of about $109 a share. But several
significant tracking-stock holders have privately balked at the terms, with the chief complaint
that Dell is overestimating the value of its shares—and thus underestimating the value of the
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10/22/2018
Dell to Interview Banks for IPO in Lieu of Tracking-Stock Acquisition - WSJ
DVMT stock. Dell has said the deal is “extraordinarily fair” and gives tracking-stock
shareholders a path to invest in a broader business.
Shareholders who are considering rejecting the current deal in a vote that is required for it to
go through include Elliott Management Corp., Carl Icahn, some teams at BlackRock Inc., Dodge
& Cox, Farallon Capital Management LLC and Canyon Capital Advisors LLC, according to people
familiar with the matter. These holders represent around 20% of the shares, according to
FactSet.
In a sign of the danger the deal won’t go through, DVMT stock currently trades at just over $96.
A straight IPO, in which Dell would sell shares directly to the public and may buy out the
tracking-stock holders at a smaller premium, is seen as a backup. Even if the DVMT deal falls
apart, there is no guarantee Dell will hold a traditional IPO, which some analysts have said
would result in a lower valuation for the company.
Last week, Dell said its current DVMT offer is final, meaning it won’t raise the price. When
asked about the possibility of another way of going public at an analyst day, Dell Chief Financial
Officer Tom Sweet said if shareholders reject the DVMT offer, the company will “go back to
status quo.”
The deal on the table, which would help simplify Dell’s complicated ownership structure, was
announced this summer. It was the culmination of a strategic review the company had been
conducting for months that also looked at a straight IPO and a combination with VMware itself.
The tracking stock was created as a way to help finance Dell’s 2016 purchase of storage pioneer
EMC. Dell, which was previously public, went private in a roughly $25 billion leveraged buyout
in 2013 by its founder, Michael Dell, and investment firm Silver Lake.
Once the largest personal-computer maker, Dell is now known as much for its corporate
products such as storage, servers and security software. It also is joining the crowded field of
companies wagering big money on the so-called Internet of Things, as the computing giant
looks for new avenues of growth amid a shift in corporate spending to the cloud.
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