Investment firm offers to buy Novell; shares skyrocket
Elliott Associates, an investment firm with an 8.5 percent stake in Novell, today extended an offer to take Novell private in a deal valued at about $2 billion. The firm offered a cash of $5.75 per share, a 49 percent premium over the company's current value, according to a letter sent to Novell's board of directors. The firm said the offer "implies an enterprise value net of cash of $1.0 billion."
In the letter, the firm said that it has been closely following Novell for some time and that the company's effort to shift away from its legacy division through acquisitions and new strategies has largely failed. As a result, the company stock has "meaningfully underperformed all relevant indices and peers. The letter said they believe Novell shareholders will find the offer to be attractive. From the letter:
Based on our detailed review of the Company's publicly available information and our substantial knowledge of the software industry, we are pleased to submit this proposal to acquire all of the shares of common stock of Novell for a cash price of $5.75 per share. This price represents a premium of 49% over the Company's current enterprise value and 77% over the Company's 90-day volume-weighted average enterprise value. As the Company's cash balance of nearly $1.0 billion represents almost 60% of its current market capitalization, we believe that a premium to enterprise value represents the most meaningful measure of the value that our proposal offers stockholders, valuing the Company's cash at on the dollar despite the fact that a significant portion of that cash is overseas and may not be realized in a tax efficient manner. Importantly, this price represents a premium of 115% over the Company's enterprise value on January 4, 2010 , the last trading day before we commenced actively acquiring Novell's common stock. This price also represents a 37% premium to Novell's closing stock price on January 4, 2010 and a 20% premium to Novell's closing stock price yesterday. By any measure, we believe our proposal represents a compelling opportunity that your stockholders will find extremely attractive.
Shares of Novell were down slightly in regular trading, closing at $4.75. Shares skyrocketed after Elliott Associates announced its offer, shooting up nearly 27 percent in after-hours trading