8-KMaterial AgreementsRegulation FDExhibits & Filings

Dell Technologies Inc. 8-K Report, Material Agreement (Nov 15, 2018)

Filed November 15, 2018For Securities:DELL

Summary

Dell Technologies Inc. filed an 8-K on November 15, 2018, to announce a significant amendment to its previously disclosed "Class V transaction" merger agreement. The core of the amendment involves a substantial increase in the cash consideration offered to holders of Class V Common Stock. The maximum aggregate cash available for this transaction has been raised from $9 billion to $14 billion, and the per-share cash price has increased from $109.00 to $120.00. This amendment is accompanied by an increase in the minimum share consideration for Class C Common Stock, with the potential for further adjustments based on the amount of cash elected by shareholders and the trading price of Class V stock. Additionally, the amendment introduces important corporate governance changes, including provisions for an additional independent director on the board and the establishment of a Nominating and Corporate Governance Committee, with specific composition requirements. The company has also secured a commitment letter for up to $5 billion in debt financing to help fund the increased cash component of the transaction. Major stockholders have entered into voting and support agreements to back the amended deal, and VMware has waived certain provisions to facilitate the amendment. These changes represent a material shift in the terms of the Class V transaction, offering enhanced value to Class V shareholders and initiating governance reforms.

Key Highlights

  • 1Dell Technologies increased the Maximum Aggregate Cash Consideration for the Class V transaction from $9 billion to $14 billion, a 56% increase.
  • 2The per-share cash consideration for Class V Common Stock holders has been raised from $109.00 to $120.00.
  • 3The minimum Share Consideration Exchange Ratio for Class C Common Stock has been adjusted, with potential for further increases based on cash elections and Class V stock trading price.
  • 4Commitment for up to $5 billion in debt financing secured to fund the increased cash component of the transaction.
  • 5The amendment introduces corporate governance changes, including the appointment of a fourth independent director and the establishment of a Nominating and Corporate Governance Committee by June 30, 2019.
  • 6Key stockholders, including Elliott Associates and Dodge & Cox, have entered into voting and support agreements to approve the amended merger agreement.
  • 7VMware has waived certain provisions in its prior agreement to allow Dell Technologies to enter into this amendment, facilitating the transaction.

Frequently Asked Questions

The primary change is a significant increase in the total and per-share cash consideration offered to holders of Class V Common Stock. The maximum aggregate cash has been raised from $9 billion to $14 billion, and the per-share cash payment has increased from $109.00 to $120.00.

Dell Technologies has secured a commitment letter for up to $5 billion in debt financing. This debt financing, along with Dell Technologies' share of a special cash dividend from VMware and existing cash on hand, will be used to fund the increased cash component of the transaction.

The Exchange Ratio Adjustment means that if a significant number of Class V shareholders elect to receive cash, or if the trading price of Class V stock falls below a certain threshold, the number of Class C shares issued per Class V share will increase. This adjustment helps ensure that the total value received by Class V shareholders remains competitive, balancing cash and stock considerations.

The amendment mandates the appointment of a fourth independent director to the Board of Directors by June 30, 2019, following consultation with Class C stockholders. Additionally, a Nominating and Corporate Governance Committee will be established, initially comprising Michael Dell, Egon Durban, and the new independent director. Furthermore, Class C stockholders will gain the right to elect one director ('Group IV Director') beginning with the second annual meeting post-closing.