Novell rejects $2bn takeover bid
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Troubled systems vendor claims private equity bid undervalues company, board says it will now explore alternatives
Software and services provider Novell has rejected a $2 billion takeover offer from private equity firm Elliott Associates, dismissing the bid as "inadequate".
The New York-based hedge fund currently owns an 8.5% shareholding in Novell and on 2 March made the offer to buy the struggling company outright, stating that the vendor had "under-performed all relevant indices and peers".
Having rejected the bid, Novell says that it will instead explore alternatives in order to raise capital, such as a stock repurchase, strategic partnerships or the sale of the company at a higher price.
In a statement, the vendor's board said that Elliot Associates' $5.75 per share bid was "inadequate" and "undervalues the company's franchise and growth prospects".
Novell has seen revenue fall in six consecutive financial quarters. In its most recent quarter it suffered a 5.8% revenue decline to $202.4 million, driven by lacklustre performance in both software and services. Despite this, the company posted 89% growth in net income to $20.2 million for the quarter, which Novell attributed to favourable currency fluctuations and 'expense management'.
Private investment firm Blue Harbour Group, which owns a 4% stake in Novell, agreed with the decision to reject the approach, commenting that the vendor's value "significantly exceeds" the offer put on the table by Elliott Associates.
