Novell Acquisition Bids Going Public

Hedge funds have intensified their efforts to take over Novell, a signal that the software company appears destined to be broken up. After hedge fund Elliott Associates made a public bid for Novell in March, the company said it would solicit offers from other firms in a tactic that could drive up Novell stock. Elliott's bid resulted in Novell's stock price jumping 30% to more than $6 a share.

May 20, 2010

2 Min Read
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Hedge funds have intensified their efforts to take over Novell, a signal that the software company appears destined to be broken up. After hedge fund Elliott Associates made a public bid for Novell in March, the company said it would solicit offers from other firms in a tactic that could drive up Novell stock. Elliott's bid resulted in Novell's stock price jumping 30% to more than $6 a share.

The stock was trading at $5.93 in stock market trading Wednesday. The Wall Street Journal reported that about 20 potential acquirers -- most of them hedge funds -- have been examining Novell and are likely to make their bids public this week.

In similar situations the acquiring firm generally breaks up the acquired firm and sells the pieces off one at a time on the theory that the sum of the parts is worth more than the standalone company. Founded in 1979 in Utah as Novell Data Systems, the company has been built up over the years by acquisitions. Today Novell has four major units. One Novell operation, established in 2006 with Microsoft, markets open source software. Novell's 2003 acquisition of SUSE in 2003 strengthened its open source business. Its main open source software products include SUSE Linux Enterprise Server, SUSE Linux Enterprise Desktop, and SUSE Moblin.

When Elliott made its unsolicited bid in early March, the hedge fund said it owned some 8.5% of Novell. Elliott criticized Novell for what it called largely unsuccessful "acquisitions and changes in strategic focus." In its most recent financial report, Novell said it had a first-quarter profit of $20.2 million on revenue of $202.4 million.

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