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Dell Discusses Sweetening Tracking-Stock Offer With Large Shareholders

Cara Lombardo

Dell Technologies Inc. has been contacting large shareholders of an affiliate about sweetening a roughly $22 billion bid to buy them out before the unpopular deal goes to a vote next month.

In the past week, Dell representatives have approached a handful of large holders of shares in Dell Technologies Inc. Class V, known by its ticker DVMT, to discuss what they would need in a recut deal, people familiar with the matter said.

Dell could decide as soon as this week whether to increase the offer for DVMT shares, which track the personal-computer and data-storage giant’s controlling stake in cloud-computing company VMware Inc. There is no guarantee Dell will end up improving the terms, and it is unclear how much of a sweetener may be under consideration.

Richard Drew/Associated Press Michael Dell, chief executive of Dell Technologies, visiting the New York Stock Exchange in July.

A deal would mark Dell’s return to the public markets and simplify its complex structure. The company has previously ruled out increasing the $109-a-share offer amid investor resistance and has also explored the possibility of a straight initial public offering instead.

The proposed buyout, spearheaded by founder Michael Dell and investment firm Silver Lake, faces intense opposition from several large shareholders, including activist investor Carl Icahn, who owns a roughly 8.3% stake. He is urging others to vote against the deal and last week sued Dell, accusing it of withholding information.

The company has said Mr. Icahn’s allegations are unfounded.

The mounting opposition appears to have brought Dell to the realization that if it doesn’t sweeten the takeover bid, the deal is doomed to fail.

The current offer, made in July, would allow DVMT holders to exchange each share for 1.3665 shares of what would become a newly public Dell, or $109 in cash. DVMT shares closed Tuesday at $92.10.

Mr. Icahn has said he believes DVMT is worth approximately $144 a share, while P. Schoenfeld Asset Management LP, which owns a much smaller DVMT stake, said in a letter made public last month that the consideration should be increased by 20%. Mr. Icahn has also said he could make a competing partial bid to buy DVMT shares, should some holders want to cash out at a lower price than he feels is fair.

The Wall Street Journal has previously reported that other holders, together owning a big chunk of DVMT shares, were considering rejecting Dell’s offer. They include Elliott Management Corp., some teams at BlackRock Inc., Dodge & Cox, Farallon Capital Management LLC and Canyon Capital Advisors LLC.

A vote on the deal is scheduled for Dec. 11.

Write to Cara Lombardo at cara.lombardo@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

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