Summary: The 'vulture fund' responds to Novell's first rejection of a takeover, which still leaves room for more offers to be made

FOR background about what seems like Novell's imminent sale, have a look at:

1. Novell May be Going Private, Hedge Fund Has Cash
2. Analyst Expects Microsoft Bid to Buy Novell
3. Ron Hovsepian Receives Another Large Lump of Cash as Novell Sale Looms
4. GNU/Linux-Savvy Writers View Elliot Associates as Bad Neighbourhood
5. Firm Behind Novell Bid Has Shady Past, Could be Tied to Microsoft (Paul E. Singer's 'Vulture Fund')
6. Simon Phipps: “Seems Even With Microsoft’s Support Novell Couldn’t Cut It”
7. Vulture Fund Still the Only Bidder for Novell

Not much has changed since then, but now they talk about the price. Here is the press release and some initial coverage [1, 2, 3]. It seems like an issue of price.

Novell Inc. said a $5.75-a-share acquisition offer from Elliott Associates LP is “inadequate” and undervalues the maker of Linux operating-system software.

Novell’s board is reviewing its alternatives, which include a stock repurchase, joint ventures, a cash dividend, a recapitalization and a sale of the company, the company said in a statement.

In the mainstream press, a lot of attention is paid to the word “inadequate”, which is included in many headlines [1, 2, 3, 4, 5, 6, 7]. It does not indicate an idealogical issue but one that's to do with Novell being undervalued. According to the VAR Guy, Novell "Welcomes Other Bidders".

Translation: Novell is willing to listen to more takeover bids. But is that really news? Shouldn’t Novell’s board always be looking for alternatives to enhance stockholder value?

Also, Novell’s rejection of the Elliott Associates’ bid mentions “Novell’s growth prospects.” Hmmm… Is Novell really a growth company? Top-line financial results suggest no. But individual product groups — particularly SUSE Linux — suggest yes.

There is a push for Novell to offer itself, maybe to another company like Microsoft. "Elliott welcomes Novell's call to sell company," says Reuters. There is an official statement.

Investment fund Elliott Associates, which had previously bid for Novell Inc (NOVL.O), said it welcomed the business-software maker's decision to sell itself.

"We welcome the Board's decision to conduct a sale of the company, which we believe is the best way to maximize shareholder value," Elliott said in a statement.

It sounds rather fishy. It's almost as though they just want another company to pick Novell up. Additionally, since Singer's shell has almost 10% of Novell (in terms of shares), the surge of the stock has already made him money and publicity.

More in the New York Times (blogs): "Elliott Welcomes Novell’s Move to Put Itself in Play"

Elliott Associates said Monday that it was encouraged that Novell would consider selling itself after the business software maker rejected Elliott’s unsolicited $2 billion takeover offer as “inadequate.”

“We welcome the board’s decision to conduct a sale of the company, which we believe is the best way to maximize shareholder value,” Elliott said in a statement. “Our goal is to acquire Novell, and our cash offer to acquire all of the company’s shares for $5.75 per share provides shareholders with a substantial premium.” It added, “We look forward to the process and to actively pursuing an acquisition of the company.”

Novell is up on expectations of a sale [1, 2], which investors perceive as a positive thing. As we stressed before, Novell is just bargaining. The initial rejection does not mean that Novell opposes a takeover. It's like an animal's love dance. ⬆