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Hedge Fund Offers $2 Billion For Novell
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."
A law firm is already investigating 'potential breaches of fiduciary duty and other violations of state law in connection with an alleged unfair takeover.' Basically seems to allege that should this deal go through, it would be unfair for current long time shareholders of Novell as Elliott's takeover would be underpaying and ripping them off. I'm not sure if this is standard operating procedure or not but one would think that the stock market would offer a good estimate of Novell's true worth. Apparently someone thinks 20%+ on top of that is unfairly low.
My work here is dung.
They both start with 'N' you clod!
beyond that norton is not novell, novell actually has a pretty strong enterprise presence. A hedge fund buying novell is a really bad sign, to be honest. Novell is doing fine. Them trying to label Novell as unsuccessful is basically a flat out BS.
What I suspect this means is that someone's trying to stop Novell before the Novell v. SCO case comes around. They're trying to see if the Novell board is greedy enough to do it, and I suspect they aren't and neither are the shareholders.
A hedge taking over a company if that hedge has no experience managing in the sector of the company they're taking basically means they're going to tack on association/management fees onto novell and dump them to someone else.
Where the hell did they get that kind of money? I guess that even during a recession people still need their hedges pruned and their bushes trimmed.
Summation 2
The stock trades higher when the street thinks that the bids are too low. Nobody is going to tender their shares @ $5.75 when they can get a better price by selling at market. If the above the offer price is sustained, then either the bid will have to be increased or withdrawn. This happens all the time, and is a normal function of a stock market. The value of a company may be more or less after it is taken over - the goal of the bidder is to bid as low as possible. The goal of shareholders is to get the highest bid possible. The goal of management is to maximize shareholder value, which can involve sale, profit improvement, or a host of other things.
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.
Or Microsoft is behind this and they want full control of Novell...
Eh, the story is about Novell, and nobody has used the word Microsoft and Linux yet, and they usually go together with 'Novell'...
Oh, and the SCO vs Novell trial is still on the 'todo list' for the courts...
Who knows what is really going on here... People tend to think long and hard before offering to spend $2B of their own money...
--- Hindsight is 20/20, but walking backwards is not the answer.
From a pure financial play I don't see how paying 2 billion for 990+ million cash makes sense.
Basically because the hedge fund is probably betting they can sell the assets of Novell for more than $1.1B. Groupwise alone in the right hands (HP or Oracle maybe?) is basically an annuity that might be worth that much. Novell has other products that are decent and probably worth something to the right party. My guess is that the hedge fund will strip out the cash and then sell the assets of the company to the highest bidder on the theory that the assets are worth more than the whole company.
The rest of Novel isn't really worth anything UNLESS, they turn Novel into another FLOSS services firm like RedHat.
Doubtful. Novell's value is in its installed base of software - not in their services. I don't think it could turn itself into a successful service company - better to sell to a large service company (HP, Oracle, IBM). I don't think they have the resources to transform themselves like that and if they tried I'd expect the shareholders to be pissed. Selling the company is probably the right play - the only question is what price can they get?
Novell has been taking good care of Suse Linux. Since Novell bought them, they continued working on what I think is the best Linux distro, without hindrance, boosted their marketshare and helped in giving Linux a corporate-friendly image. I hope the new owners of Novell (should such takeover really take place) will have a hands-off approach and let things chug along nicely, as they have been.
"The agriculture ministry is not in charge of Gundam" - Japanese ministry official.
if they do the normal "private equity" deal what is going to happen is they will buy the company and then "lend" it money from another one of their legal entities along with declaring special dividends. that cash is going to leave Novell and go into the hedge fund. a lot of people will be fired to free up cash that will go to the hedge fund. Once the IPO market becomes better they will sell the company to someone else or if Novell goes belly up they will write it off for the tax benefits.
i just had a chat with a sales rep and the big thing to sell this year is services. everyone is trying to sell services. probably because there is no more profits in hardware since everything is commodity. Services are high margin products and very cash rich. you pay some guy $40 an hour and pimp him out for $200 an hour.
Anyone who's been a systems administrator for many years has probably dealt with Novell at one point or another in their career. Before Windows NT came on the scene, NetWare was pretty much THE PC file-and-print server solution. I remember one of the good things about it was that it was lightweight - command line UI, simple admin tools. Microsoft brought back this idea of command-line-only server consoles with Windows Server Core in the last version. Novell also has some pretty neat tools like ZenWorks. That said, it's interesting to see this potential deal on the table. Even 10 years ago, you'd never see Novell ready to throw in the towel.
I wonder why their acquisition of SuSE and the interoperability initiative with Microsoft didn't change their fortunes...they had a good plan for migrating all their NetWare customers to Linux. I know NetWare is still heavily used in European companies and in the health care sector, so you would think they have a willing customer base to pay the bills with. I guess they couldn't compete with Red Hat for distirbutions and IBM for support services in the Linux world.
It's a good lesson though -- no matter how much of a market dominator you are, you're always a few steps away from being destroyed.
Umm? Do you even realize who this hedge fund is? I'm going to copy from groklaw here.
Sounds like no, my sarcastic friend. Elliott is run by Paul Singer. Link states:
Also from the NYT
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I didn't have to read either of those to already know that. Notice from the NYT: Vulture fund.
Meanwhile, what's the kicker?
The shareholders are pissed already and think it's BS/hostile takeover. from that link:
So umm, whoops?
It is like I have been saying for years...Wall Street is just Las Vegas with better clothes....a vulture comes in, and day traders, the boils on the ass of society, go apeshit and start buying, driving up the price. It is thanks to this kind of stupidity that companies only think short term now and let their assets go to pot. It is the whole "screw everything but the quarterly report!" that has caused so much of this country to fall apart. If a company could increase the quarterly by burning the company for the insurance the day traders would be all for it. It is nothing but legalized gambling for those that aren't inside traders.
As for TFA? My guess is the raiders want to drain the coffers and spin off Groupwise and a few other assets to make a quick buck. There are enough Groupwise customers out there that it could make them a quick buck, hence the offer. The only question is will they pull a Yang and get greedy and price themselves right out of the offer with poison pills and demands for crazy money. Either way their stock will probably hit the basement if the deal doesn't go through, as the day traders follow the herd to the next deal.
ACs don't waste your time replying, your posts are never seen by me.