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DOW JONES NEWSWIRES
Novell Inc. (NOVL) rejected an unsolicited takeover bid valued
at about $2 billion, but the software company essentially put
itself up for sale by saying it would consider alternatives to
enhance shareholder value.
Hedge fund Elliott Associates LP, the third-biggest holder of
Novell shares, had made its offer of $5.75 a share on March 2. Over
the weekend, the Waltham, Mass., company rejected the bid, saying
it undervalued Novell and its growth prospects.
Novell, which works with open-source and proprietary software,
hasn't had a blockbuster hit since its defining product--NetWare
network operating-system software--debuted more than two decades
ago and dominated its market.
Like many of its peers, Novell is now trying to control costs as
revenue has fallen.
The company, though, is considered attractive because it has
about $991 million in cash as of Jan. 31, roughly half of its
market value, and is a player in the Linux market. Novell has been
trying to boost the presence of its Linux-based operating system in
netbooks, which have become popular.
For its part, Elliott appeared undeterred by the rejection,
saying it welcomes "the board's decision to conduct a sale of the
company, which we believe is the best way to maximize shareholder
value." It said it "looks forward to actively pursuing an
acquisition" with its offer of $5.75 a share.
Elliott, which started buying Novell shares Jan. 4, holds an
8.5% stake.
A Novell spokesman declined further comment Monday.
Shares of Novell rose 4.4% Monday to $5.89, above Elliott's
offer price. The stock has risen 41% so far this year.
Some analysts have voiced skepticism that the deal will come to
fruition, saying Elliott doesn't have experience operating a
business as complex as Novell, and that taking the company private
to sell off its parts wouldn't create much value. Elliott has said
it has no plans to sell any of the company's units if it buys
Novell.
Private investment firm Blue Harbour Group, which owns 4% of
Novell shares--making it the eighth-biggest holder--said it agreed
that the Elliott bid undervalued the company.
"Blue Harbour has been in active and constructive discussions
with Novell's management in recent months on various alternatives
to create and unlock value," Chief Executive Clifton S. Robbins
said.
-By Nathan Becker, Dow Jones Newswires; 212-416-2855;
nathan.becker@dowjones.com