Novell Agrees to Be Bought by Attachmate for $2.2 Billion

By Chris Preimesberger  |  Posted 2010-11-22 Print this article Print

UPDATED: Microsoft and a couple of its partners will acquire IP connected with WordPerfect as part of the overall deal.

In a mildly surprising turn of events, financially troubled enterprise network and application software provider Novell said Nov. 22 that it has agreed to be acquired by Attachmate Corp. for $2.2 billion in cash.

The purchase price works out to $6.10 per share, a 28 percent premium on the closing share price on March 2, 2010.

That date was the last trading day prior to the public disclosure that hedge fund Elliott Associates had, in an unsolicited offer, proposed to acquire Novell for a $5.75 stock price. Novell rejected Elliott's offer at that time but said it would seek other possible buyers for the company.

However, since Elliott owns 29.9 million shares of Novell, it now will realize an approximate $40 million profit from the sale after hastening it along with its March offer.

Thirty-year-old Attachmate, which has about 65,000 customers, is an IT host connectivity and systems/security management integrator that has offices on six continents and is headquartered in Seattle. It is owned by an investment group led by Francisco Partners, Golden Gate Capital and Thoma Bravo.

Novell also said it will sell some of its intellectual property assets to CPTN Holdings LLC, a consortium of technology companies organized by Microsoft, for $450 million in cash.  This payment will be contained  in the amount to be paid by Attachmate.

What Microsoft is likely to obtain

Novell did not specify which assets Microsoft will get, but senior IT analyst Katherine Egbert of Jefferies & Co. said in an advisory that they are "most likely related to WordPerfect, which Novell acquired in the late 1990s, and through which Novell had sued Microsoft for anti-competitive behavior.

"Recall that Microsoft had settled outstanding litigation with Novell related to Unix in 2006, paying what amounted to [about] $350mm to Novell over several years."

The WordPerfect product line was sold twice, first to Novell in June 1994, who then sold it to Corel in January 1996. However, Novell kept the WordPerfect Office technology, incorporating it into its GroupWise messaging and collaboration product.

The longtime rumor that Novell was planning to sell its Linux server business to VMware in a separate deal turned out not to be true. Attachmate, however, said it plans to break out Novell's enterprise Linux business, SUSE, into a separate business unit and join both Novell and SUSE with its other holdings, which include NetIQ.

"The $6.10 per share acquisition price appears to be a reasonable takeout value," Egbert said. "It values NOVL shares at 2.7x EV/revenue and 25x forward earnings. The sale of SUSE Linux by Novell to Attachmate is also a mild positive for Red Hat."

Despite the uncertainty about its future ownership, Novell nevertheless has continued to run its business as usual and produce new products. At VMworld last September, the company unveiled its first cloud computing platform, Novell Cloud Manager.

Editor's note: This story was updated to clarify Novell's relationship to WordPerfect.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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