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Novell Rejects Buyout Offer

• By Jeffrey Schwartz
• 03/22/10

Novell has rejected Elliott Associates's $2 billion takeover bid, calling it inadequate, but indicated it was open to other offers.

Elliott, a New York-based hedge fund, issued the surprise, unsolicited bid in a letter to shareholders March 2. Waltham, MA-based Novell said it would review the bid. In a statement released Saturday, March 20, Novell said it was rejecting the bid because it undervalues the company's growth potential. The board said it will consider various alternatives.

"These alternatives include, but are not limited to, a return of capital to stockholders through a stock repurchase or cash dividend, strategic partnerships and alliances, joint ventures, a recapitalization and a sale of the company," the company said.

Clifton Robbins, CEO of Blue Harbour Group, which owns 4 percent of Novell's shares, is among those who believe Elliott's bid was not adequate. "We agree with Novell's management and board of directors that the company's value significantly exceeds Elliott's proposal," Robbins said in a statement issued Saturday. "We support the company's decision today to pursue a formal review process with the assistance of its advisors."

But it appears Elliott achieved its goal--convincing Novell to entertain buyout offers. In a statement released today, the company said it is pleased by Novell's decision to consider its options. "We welcome the board's decision to conduct a sale of the company, which we believe is the best way to maximize shareholder value," the company said. "We look forward to the process and to actively pursuing an acquisition of the company."

The news of Novell's decision to put itself in play comes as the company is holding its annual BrainShare technical conference this week in Salt Lake City.

Once best known for its network operating systems and network directories, the company is now a diversified supplier of software and services. Novell's key offering currently is SUSE Linux, though it is overshadowed by the much more dominant Red Hat. Novell also offers managed services and various management tools.

Novell has also become a key Microsoft partner. Following a two-decade bitter rivalry, the two companies have more recently become unlikely partners in Redmond's efforts to link its various wares, including Windows and Silverlight to open source platforms including Linux.

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