03.25.10

Novell for Sale

Posted in Finance, GNU/Linux, Novell at 4:54 am by Dr. Roy Schestowitz

Summary: Many news reports confirm that Novell’s intention was to say that it will be sold given the right offer

EARLIER this week we showed that Novell avoids talking too much about putting itself up for sale. For those in need of some background, here are previous posts on the subject:

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

We have already explained the significance of this. Novell is said to have UNIX and it’s handling both SCO and Microsoft in court (WordPerfect case). SJVN, a GNU/Linux expert, is asking: “Now what, Novell?” [for brevity, we mostly quote headlines and use italics to mark them]

There’s nothing like starting a technical conference, like Novell’s BrainShare, off with a bang. Or, in this case telling Elliot Associates’ unwelcome offer of not quite $2-billion for the company that Novell has no interest in selling out, not for that little anyway.

I think this was a smart move by Novell’s management. I think if Elliot Associates were to buy Novell it would end up killing the company and its Linux distributions: SUSE Linux and openSUSE.

The Microsoft boosters from Redmond say that “Novell [is] Up for Grabs”.

Maybe Elliott Associates will get its prize after all, and maybe there’s no other vendor out there that wants to swallow Novell. That sure wouldn’t be very exciting, though. We’re hoping for an old-fashioned battle here. Let the siege begin!

It says: “Let the siege begin!”

Those boosters from the ‘Microsoft press’ think it’s just a game.

Another publication that’s always Microsoft sympathetic asks: “Too Little, Too Late For Novell?”

The news from Utah goes like this:

During the opening keynote Monday, chief executive officer and president Ron Hovsepian addressed what he called the “elephant in the room,” saying Novell’s board of directors over the weekend rejected an unsolicited bid by Elliott Associates to acquire it for roughly $2 billion.

We have already covered this. It does not contradict the many reports which say that Novell is up for sale. A blog in the New York Times says that “Elliott Welcomes Novell’s Move to Put Itself in Play”

In rejecting Elliott’s bid, Novell said Saturday that the hedge fund’s offer “undervalues the company’s franchise and growth prospects.”

Instead, Novell said its board was considering alternative ways to increase its value to its shareholders, including an outright sale of itself.

Other reports from the news say:

1. Novell Seeks Substitutes After Casting Off Elliott’s Acquisition Bid

Novell Inc. on Saturday discarded a bid by hedge fund Elliott Associates LP aimed at buying the company for about $1.8 billion, on Monday. It explained that the deal would have turned down the company’s value in the international economy, thereby hindering its growth.

However, the software company set itself on sale seeking a boost in the shareholder value.

2. Suitor says will still try to buy Novell

Elliott Associates LP said Monday it still wants to acquire Novell Inc. despite the company’s rejection of the hedge fund’s initial offer.

3. After rejecting bid, Novell open to sale

Elliott yesterday released a statement praising Novell’s willingness to consider a sale and reaffirming its offer.

Officials from Novell and Elliott declined to comment further.

4. Novell Up after Rejecting $1.8B Hedge Fund Offer, Remains on Sale

ZDNet wonders “What’s it [Novell] worth and who’s buying?”

From AP we have a report that appeared in the Boston press and also in Forbes. The headline says that Novell “explores options”.

For those who want more information about the man behind Elliott, BNET has it.

I looked at the question when reading about the bid for Novell (NOVL) by investment firm Elliott Associates. Looking into the company and its president, Paul E. Singer, I came across this map, from Muckety.com, that shows connections between Singer and a number of conservative political groups…

Readers can see the image. There is some politics in there, as we showed a couple of weeks ago.

Minyanville.com describes Singer as “riding in on its white horse” (which is extremely funny because he is a predatory vulture).

2. In any case, I was happy to see Elliott come riding in on its white horse to try to rescue what’s probably a restless shareholder base. But $5.75 a share? If I were on the Novell board I’d probably hold out for a higher number, too.

3. But keep in mind that there are risks to that. You’ll remember that hardball didn’t work so well for Yahoo (YHOO). Also it’s not like Novell is expected to blow the doors off the barn on the earnings front this year. I wouldn’t be surprised to see the two parties continue their mating dance in the weeks ahead, and for some sort of a deal to come to fruition.

The same site compares Novell’s behaviour to that of Yahoo!, which was hijacked after many bids and aggressive tactics that really ought to be illegal.

More coverage of this can be found in:

• Novell mulls options after bid
• Unsolicited offer for Novell spurs its board to action
• Novell spurns buyout offer
• Novell rebuffs $1bn takeover bid
• Novell Passes On Hedge Fund’s $2 Billion Offer
• Software firm Novell rejects Elliott’s $2-billion unsolicited takeover offer
• Novell board rejects Elliott offer
• Novell Declines Elliott Takeover Offer
• Novell Declines $2 Billion Takeover Bid
• Novell Declines Elliott Offer, Hedge Fund Hails Sale News
• Novell Rejects Buyout Offer (same headline from a Micorosft-boosting site)
• GameStop, Hasbro, Medtronic, Novell: U.S. Equity Preview

Novell Inc. (NOVL US): The maker of Linux operating-system software said yesterday a $5.75-a-share acquisition offer from Elliott Associates LP is “inadequate” and undervalues the company.

Blue Harbour, one of Novell’s larger shareholders, so far agrees with Novell’s action.

Clifton Robbins, CEO of the private investment firm Blue Harbour Group, which own a 4% stake in Novell, echoed Hovsipian’s message in a statement that said “the company’s value significantly exceeds Elliott’s proposal.”

Here is the official word from PRNewsWire:

“We agree with Novell’s management and Board of Directors that the company’s value significantly exceeds Elliott’s proposal. Blue Harbour has been in active and constructive discussions with Novell’s management in recent months on various alternatives to create and unlock value, and we support the company’s decision today to pursue a formal review process with the assistance of its advisors.”

Other shareholders were also supportive of Novell’s action (they probably expect Novell to sell for more money), so the stock rose as the week began. To give examples of coverage:

1. Wall Street Breakfast: Must-Know News

Novell says no to Elliott bid. On Saturday, Novell (NOVL) rejected Elliott Associates’ $1.8B bid to take it private, calling the offer “inadequate,” and saying it “undervalues the company’s franchise and growth prospects.” Some have questioned whether Novell is really worth that much, but others say it could be worth even more considering its $1.82B in assets. Novell plans to initiate a review of alternatives, including a share buyback, cash dividend, joint ventures, recapitalization, alliances or an outright sale.

2. In The Papers 22 March

The paper also notes that US software firm Novell has rejected an unsolicited takeover offer from hedge fund Elliott Associates, calling the USD5.75 a share cash offer “inadequate”. Elliott, which owns about 8.5 percent of Novell, announced its USD2 billion offer earlier this month. Novell said its board had authorised a review of alternatives for realising value for shareholders, including share buy-backs, dividend payments, a joint venture or alliance, or the sale of the company.

3. Benzinga’s Top Pre-Market Gainers (SONS, NOVL, WSM, LGF, GENT)

Novell, Inc. (NASDAQ: NOVL) climbed 4.96% to $5.92 in the pre-market session. Novell Inc on Saturday, March 20, 2010, rejected an unsolicited bid by hedge fund Elliott Associates LP to buy NOVL for about $1.8 billion, saying the deal undervalued Novell and its growth prospects. In the previous trading session, NOVL closed at $5.64. NOVL has surged over 36% in the last year.

4. Novell Jumps Early on Rejection of Weak Acquisition Bid (NOVL)

5. Novell Rejects Elliott Associates $5.75 Per Share Takeover Proposal (NOVL)

6. Zanett, Novell: Early Volume Plays

Novell (NOVL) jumped by 29 cents, or 5.1%, to $5.93 shortly after the opening bell Monday after the software company rejected an unsolicited bid from Elliott Associates as “inadequate.”

7. A good month for Novell Inc.; NOVL, ASIA, MFE, SYMC

8. Novell: The Trend Continues Up (NOVL) (also in Fox)

9. Novell, Inc (NOVL) Stock

10. Closing Bell: Health Care Doesn’t Kill the Bulls (C, SOMX, NOVL, PALM, T, AIG, NBG)

Novell Inc. (NOVL) rejected the Elliott private equity takeover bid as ‘inadequate’ but it is now exploring strategic alternatives and assess its options, including a potential sale. Shares were up close to 5% at $5.91 shortly before the closing bell.

11. Stocks in the News: PepsiCo, Google, Tiffany (same text here)

Novell (NOVL) shares jumped 4.8% after the company on Saturday rejected an unsolicited bid by hedge fund Elliott Associates to buy the company for about $1.8 billion, saying the deal undervalued Novell and its growth prospects.

12. The Ticker

Shares of business software maker Novell Inc. rose 5 percent after the company rebuffed a $2 billion offer over the weekend from investment fund and shareholder Elliott Associates.

13. Sector Update: Technology Shares Higher As Google Stops Censoring Chinese Search Results

Novell (NOVL) shares climbed $0.27, or almost 4.8%, to $5.91 on news over the weekend that a $2 billion buyout offer from private-equity firm Elliott Associates was “inadequate” and undervalued the company, MarketWatch reported. Elliott’s offer valued Novell’s stock at $5.75 a share. Novell’s board of directors is exploring several options, included a sale of the company, according the the report.

14. Micron, Seagate Lead Tech Stocks Higher

Novell rose 4.4 percent after the company said a takeover offer from a hedge fund is inadequate.

15. Notable Mergers and Acquisitions of the Day 03/22: ISIL/TWLL, NMM/NM, NOVL

Novell’s Board is committed to enhancing value for Novell stockholders and believes that an exploration of alternatives is in the best interests of the Company and its stockholders. Novell’s Board noted that there can be no assurance that this will result in any agreement or transaction. The Company does not intend to disclose developments with respect to any of these alternatives unless and until the Board has approved a specific course of action.

Here is a fascinating explanation of why Novell made the announcement on Saturday.

Take for example, the Saturday announcement by Novell rejecting an unsolicited takeover bid by Elliott Management. Novell’s news release announcing this act was issued at 11:13 a.m. on Saturday. This is unusual as these announcements typically come during the weekday, after the market opens or closes. Perhaps the Novell board met on Friday.

In such a case, was Novell’s Saturday release a mistake or a mere lack of attention to the unusual nature of this act? In the background is the question of whether Novell intentionally buried this release. Alternatively, was Novell’s board actually working so hard that it was deliberating on Saturday? In its press release, the Novell board also announced it would explore strategic alternatives for the company, including a sale.

The Saturday release may show Novell’s particular vulnerability since its shareholders can act by written consent to remove directors without cause at any time. It may also show that they are worried. And ultimately, none of this may mean much at all; it could be just a detail or a mistake, perhaps an unimportant one at that.

“It may also show that they are worried,” says the New York Times writer.

Novell’s rejection of this first bid was also mentioned in other articles such as [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17]. Having looked at them, there is nothing especially interesting there, but in summary, this journey of bids for Novell has only gotten started. █

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