By Cara Lombardo
A profit of about $200 million could be enough to get Carl Icahn to stop fighting Michael Dell.
Mr. Icahn is unlikely to push Dell Technologies Inc. to sweeten its deal to buy back shares that track Dell's interest in VMware Inc., after reaping a paper profit of around $200 million on the tracking stock and VMware's publicly traded shares, according to people familiar with the matter.
Over the past several months, the billionaire activist investor has been building stakes in both the software company, VMware, and the tracking stock, Dell Technologies' Class V shares, the people said.
Dell offered Monday to buy the tracking shares in exchange for 1.3665 shares of what will become a newly public Dell, or $109 in cash. That works out to about a 29% premium over the price before the offer was announced. VMware shareholders, meanwhile, would receive a one-time dividend of about $11 billion should the transaction close.
Mr. Icahn thinks lobbying for a better deal could be an uphill battle and it could be a challenge to gather the necessary votes and commit to a drawn-out fight with Mr. Dell, who founded Dell and is its CEO, the people said. He also thinks investors are being asked to exchange an interest in fast-growing VMware, which makes virtualization software, for a position in a company he believes has a less promising outlook, the people said. He wonders whether investors in the tracking stock will want to hold Dell stock, they said.
Mr. Icahn is also content with the quick profit he's already made, they said. Shares in the tracking stock, whose ticker is DVMT, have jumped about 12% since markets closed Friday, while VMware shares have risen about 9%. The stocks have risen 30% and 34%, respectively, in the past three months.
The deal requires signoff from a majority of tracking shares held by unaffiliated shareholders. Mr. Icahn has a record of holding out for higher prices on deals, and some reports had said he was considering trying to push for more from Dell.
Another activist investor, Elliott Management LP, which owns about a 4% stake in the VMware tracking stock, declined to comment on the deal.
Mr. Icahn and Mr. Dell have previously clashed over the direction of the PC and data-storage company. In 2013, Mr. Icahn spent six months trying to persuade Dell shareholders to vote down Mr. Dell's effort to take the company private with private-equity firm Silver Lake and instead support his own proposal.
But after the buyout group boosted the price and added a dividend, Mr. Icahn concluded it would be " almost impossible to win" -- and walked away with a roughly $70 million profit.
Write to Cara Lombardo at [email protected]