Novell Confirms $1B Acquisition Bid by Hedge Fund

Networking software maker Novell confirmed late March 2 that it has received an unsolicited offer of $1 billion, net of cash on the company's books, to be acquired by Elliott Associates, a New York-based hedge fund that already owns 8.5 percent of the company.

The statement issued by Novell's corporate marketing manager, Ian Bruce, read:

Novell, Inc. (Nasdaq: NOVL) today confirmed that it has received an unsolicited, conditional proposal from Elliott Associates, L.P. to acquire the Company for $5.75 per share in cash. Novell anticipates that its Board of Directors will review Elliott's proposal in consultation with its financial and legal advisors. J.P. Morgan is serving as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel to Novell.

According to its quarterly reports, Novell had about $650 million in cash on hand as of Oct. 31, 2009, and another $600 million in short-term investments and net receivables. Not counting those assets, the purchase price would be about $2 billion.

The news spread quickly among investors, and after-hours trading pushed Novell's stock price up 26 percent to $6 per share. It had ended the trading day at $4.75.

Elliott Associates sent the letter dated March 2 to Novell's board of directors offering to buy the company for $5.75 per share-a 115 percent premium over its Jan. 4 stock value-"the last trading day before we commenced actively acquiring Novell's common stock."

Elliott Associates principal and founder Richard Wilson did not respond immediately to an eWEEK query.

The investment fund apparently has not been a happy investor in recent years.

"Over the past several years, the company has attempted to diversify away from its legacy division with a series of acquisitions and changes in strategic focus that have largely been unsuccessful," Elliott Associates said in the letter. "As a result, we believe the company's stock has meaningfully underperformed all relevant indices and peers."