Novell Says No to a $2 Billion Buyout Offer

Posted Mar 21st 2010 2:10PM by Tom Taulli
Filed under: Novell Inc (NOVL)

On March 2, hedge fund operator Elliott Associates made a $5.75 per share offer for Novell (NOVL). The valuation of the deal was roughly $2 billion.

Well, after much consideration, Novell has finally responded. And as should be no surprise, the company says the bid is "inadequate."

Novell has little credibility right now. The company's networking business is in steady decline. At the same time, other business units -- like security and Linux -- are not making up for the problems. In fact, Novell's licensing payments from Microsoft (MSFT) have been slowing down.

So what is Novell going to do? The company says it is considering a variety of alternatives, such as a stock repurchase, cash dividend, recapitalization and so on.

But such things often have short-term benefits for shareholders. The fact remains that Novell has not been able to make the necessary changes to get back on track. Bear in mind that revenues have declined for the past six quarters.

In other words, the best alternative is to either try to get a higher price from Elliott or shop the company to a strategic buyer, such as HP (HPQ), IBM (IBM), Oracle (ORCL) or perhaps even Microsoft.

Tom Taulli advises on business tax preparation and is also the author of a variety of books, including The Complete M&A Handbook. His website is at Taulli.com.

Tags: acquisitions, Elliott Associates, inthenews, Microsoft, Novell, NOVL