Responding to Elliott's unsolicited bid, Novell said it expects its board of directors will review the $5.75-a-share cash offer with its financial and legal advisors. Generally when a publically traded firm receives an unsolicited acquisition offer, it resists the offer in an effort to drive up the stock price.
Elliott announced its offer after the stock markets closed Tuesday. Before the announcement, Novell stock closed at $4.75 and later soared to more than $6.00 in early trading Wednesday.
In a letter to Novell management, Elliott portfolio manager Jesse A. Cohn noted that the hedge fund owns some 8.5% of Novell common stock and is one of the software firm's largest stockholders.
Cohn said the offer was made based on Elliott's "detailed review of (Novell's) publicly available information and our substantial knowledge of the software industry." He added that Elliott would be able to deliver maximum value to Novell stockholders.
"Novell is a long-established company that we have followed closely for a considerable period of time," said Cohn in his letter. "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 under-performed all relevant indices and peers."
Novell began its corporate existence in 1979 in Utah as Novell Data Systems and has had a long history of ups and downs laced with several acquisitions and partnerships along with frequent top management changes.
A key acquisition of Cambridge Technology Partners in 2001 helped move the company from Utah to suburban Boston. Novell's acquisition of SUSE in 2003 resulted in several of its main open source software products including SUSE Linux Enterprise Server, SUSE Linux Enterprise Desktop and SUSE Moblin.
In its early days, Novell competed with Microsoft but later formed an alliance with Microsoft in 2006 to market open source software.
In its latest financial report, announced last week, Novell reported a first quarter profit of $20.2 million on revenues of $202.4 million.