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Summary:

On Tuesday afternoon, Elliott Associates, L.P., a hedge fund with a significant position in shares of Novell, placed an unsolicited offer to buy the company for approximately $2 billion. The offer places a high valuation on Novell, and the troubled company must consider it carefully.

Elliott Associates, L.P., a hedge fund with a significant position in shares of Novell, after the close of trading in U.S. stock markets today placed an unsolicited offer to buy the open source-focused software company for close to $2 billion. The offer places a high valuation on Novell, and is one the troubled firm will have to consider very carefully.

Elliott Associates’ offer of $5.75 per share in cash is well above Novell’s closing per-share price of $4.75, and caused Novell’s shares to rise above $6 in after-hours trading.  According to its offer 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.”

It continues:

“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.  As a result, we believe the Company’s stock has meaningfully underperformed all relevant indices and peers.”

While the offer from Elliott Associates may seem high at first glance given Novell’s recent troubles, it’s worth remembering that the company has nearly $1 billion in cash, and reported $220 million of revenues in its most recent quarter. Novell has close to $1 billion in annual revenues.

OStatic has noted that the large cash positions that both Red Hat and Novell sit on have made them prime acquisition targets among the few large, publicly traded U.S. companies focused on open source software (although rises in Red Hat’s stock price have made it less attractive). Sun Microsystems, which was also focused on open source, is no longer an independent company following Oracle’s acquisition.

If Novell accepts the new offer, it, too, will no longer be an independent company, but the offer will no doubt be carefully considered. Novell has had trouble growing its Linux business, for which it is heavily dependent on its partnership with Microsoft for deals, and saw its stock pummeled during the recession.  Novell officials have yet to comment on the offer, but as OStatic notes, a shakeup could be coming.

Image courtesy of Flickr user Oswaldo.

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  1. Elliott Associates to Buy Novell? « UNIX Administratosphere Tuesday, March 2, 2010

    [...] Elliott Associates made an offer for Novell today at almost US$2 billion ($5.75 per share). GigaOM reported on this, as did the Associated Press and the Wall Street [...]

  2. startup firms are better, rather than institutionalized companies and businesses; already entrenched in the grizzly world of competitionsan business insider marketing…..

    Yet, red hat is novel:-)! in my opinion, it will be there to stay, it shall be…

    its worth it.try it in risk;p?

  3. Elliott Associates, 2 miliardi per Novell: azioni in subbuglio – The New Blog Times Thursday, March 4, 2010

    [...] sicuro la scalata di Novell è un pacchetto goloso per Elliott Associates ma anche per il board: per questo, è stato appena annunciato l’avvio [...]

  4. Let Novell sink and Miguel de Icaza with it. They catered to their customers by making deals with Microsoft at the expense of the developers. How is that a way to run a business?
    So, Icaza works on writing Mono to port .net over to linux which no one wanted.
    Well… despite the failure that is C#, perhaps there was one thing worth while. Running silverlight on mono with moonlight meant you could finally watch netflix movies on linux!
    Right?
    Nope, Miguel de Icaza then requested linux users to beg microsoft to port their drm stack to moonlight, which microsoft didn’t do, naturally. They decidedly ported it to everything including OS X, Their cellphone, the x box, and even the playstation 3 but imply that they can’t port it over to linux because of “License restrictions”
    So, I say good riddance.

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