Novell Agrees to Be Bought by Attachmate for $2.2 Billion

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.