Slashdot Mirror

← Back to Stories (view on slashdot.org)

Hedge Fund Offers $2 Billion For Novell

Posted by Soulskill on from the large-potatoes dept.

CWmike writes "A hedge fund that is already one of Novell's largest shareholders offered on Tuesday to acquire the struggling, cash-rich enterprise software maker for $2 billion. The unsolicited offer, from New York-based Elliot Associates L.P., is for $5.75 per share in cash, a dollar per share more than Novell's closing price Tuesday of $4.75. The offer caused Novell's stock to leap 29% to $6.15 in after-hours trading. Because Novell is so cash-rich — it had $991 million in cash and equivalents at the end of January (PDF) — Elliott says the deal values Novell as an enterprise alone at about $1 billion."

1 of 144 comments (clear)

  1. Fiduciary duty by sjbe · · Score: 5, Insightful

    I'll speculate that the phrase "potential breaches of fiduciary duty" is lawyer-ese for "your bid is too low".

    No speculation needed. That is exactly what it most often means. The board of any company has a duty to maximize the return to any shareholders. Selling the company might be the best way to accomplish that - or it might not. Everything in finance is essentially a guess as to what will make the most money. It needs to be a well researched and reasoned guess but it is still a guess at the end of the day. If shareholders think they are getting a bad price it is entirely reasonable and proper for them to lawyer up and say so.

    I actually researched Novell as a possible investment about 5 years ago and came to the conclusion that the company was in a slow death spiral. Not an inescapable one but I don't see them doing anything that gives me confidence they could escape it and their stock price hasn't budged since then. The price being offered is approximately the current market capitalization. (the market cap rose yesterday once the offer price was announced - arbitrageurs bought in to bring the price close to the offer price) Novell has a lot of cash and they have some decent products that have high switching costs which is keeping them in the game. But they aren't capturing much new business. Basically I think they'll end up getting sold in whole or in parts to Oracle, IBM or HP after the hedge fund is done stripping out all the cash from the company. Novell likely has undervalued assets that are worth more separately than together.

    Disclosure: I am an accountant and I've worked on due diligence for the sales of companies.