Silver Lake Is Shifting Dell Stake to Sidecar, Newest Fund

(Bloomberg) -- Silver Lake is moving some of its Dell Technologies Inc. holdings to a new fund to ensure it can hold on to the investment after its original fund expires next year.

The firm is shifting a stake worth about $1 billion from its third fund into its newest investment pool formed last year, Silver Lake Partners V. The remainder, a majority of the fund's Dell holdings, will be moved to a special purpose vehicle that will be held by the investors in the original fund, Silver Lake Partners III.

The private equity firm said the transaction will allow it to hold shares in Dell “for the long-term, consistent with Silver Lake's belief that Dell remains an attractive long-term investment opportunity,” according to a regulatory filing Monday.

Silver Lake, based in Menlo Park, California, owns about 18 percent of Dell Technologies after helping Michael Dell take the company private in 2013, according to an earlier filing on Friday. Its third fund has about 59 million shares of Class B common stock in Dell. The firm owns another 78 million Class B shares through its fourth fund and at least three other limited partnerships.

Dell and Silver Lake have been pitching a $21.7 billion plan to go public by buying shares in a tracking stock known as DVMT, which was set up to parallel software maker VMware Inc. The deal, scheduled for a vote by DVMT shareholders on Dec. 11, has met opposition from the likes of activist investor Carl Icahn, who says the offer of $109 a share undervalues the DVMT stock.

The stock is being valued internally at about $80 a share in the stake transfer between Silver Lake's funds, people familiar with the matter said before the filing Monday. That price mirrors the implied value of Dell Class C shares in the DVMT transaction.

The sale price of the fund-to-fund transaction is expected to be based on the weighted average trading price of Dell Class C shares during an observation period if the DVMT transaction is completed, according to the filing.

DVMT shares fell 1.9 percent to $92.87 at the close in New York Tuesday.

A spokesman for Silver Lake declined to comment.

If Dell isn't able to persuade DVMT holders to accept the current offer, it has a contingency plan. The company has applied to list its shares on the New York Stock Exchange through a traditional initial public offering. Under that alternative, Dell would have the option to convert DVMT common stock into Dell common stock.

To contact the reporter on this story: Alex Barinka in San Francisco at abarinka2@bloomberg.net

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Michael Hytha, Matthew Monks

©2018 Bloomberg L.P.