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=A0November 22, 2010, 8:56 am

Novell Being Acquired for $2.2 Billion

By EVELYN M. RUSLI



9:58 a.m. | Updated

Novell, the software maker, said on Monday that it had agreed to be acquire=
d

by the Attachmate Corporation for $2.2 billion in cash.



Novell also plans to sell some intellectual property assets for $450 millio=
n

to a consortium of technology companies organized by Microsoft. Attachmate&=
#39;s

takeover is contingent on the successful closing of the sale.



Novell, a company that specializes in enterprise infrastructure software,r>
will add to Attachmate's portfolio of software brands, which includes i=
ts

namesake line and NetIQ (acquired in 2006). Attachmate has effectively

served as an acquisition vehicle, led by a trio of private equity firms:>
Francisco Partners, Golden Gate Capital and Thoma Bravo. In 2005, the

investment team purchased Attachmate for an undisclosed sum and immediately=


merged it with an earlier buyout, WRQ.



The offer of $6.10 a share represents a premium of 28 percent above Novell&=
#39;s

closing share price on March 2, Novell said in its statement. That is when<=
br>
the hedge fund Elliott Associates said said it had offered to buy the

company for $5.75 a share, or $2 billion - an offer that the board of Novel=
l

rejected as "inadequate."

Under this new deal, Elliott will stay on as an equity shareholder of

Attachmate, according to the news release.

The offer is a 9.1 percent premium from Novell's closing stock price on=


Friday.



Although the deal represents a premium for Novell shareholders, some

analysts say the transaction highlights the challenge of putting a sprawlin=
g

company like Novell on the auction block. The Novell deal stands in contras=
t

to the rest of the technology sector, which has had a wave of mergers andr>
acquisitions this year, often at rich premiums, Richard Williams, an analys=
t

for Cross Research, said. The value of third quarter deals rose 48 percent<=
br>
from the year-ago period, according to a recent report by Ernst & Young=
.



"I'm surprised the deal got done," Mark Schappel, a Benchmark=
Capital senior

software analyst said. "Novell is a very difficult deal to get done, t=
here's

a lot of moving parts."

Even though a lot of players were in the market, none of them wanted all of=


Novell, he said.



Founded in 1983, Novell rose to prominence for its network operating system=
,

Netware. However, in the mid-1990s, the company started to make acquisition=
s

to become more competitive in the enterprise space, picking up companies>
like Cambridge Technology Partners, Unix System, SilverStream Software ,>
Ximian and SUSE, a linux-based operating system business.



After its shopping spree, Novell emerged as a Frankenstein-like company,>
featuring pseudo-integrated limbs and a cloudy vision, Mr. Schappel said.r>
Thus, when the company started to explore its options this year, there were=


several buyers for parts of the business but few for the whole.



Although its SUSE business only broke even earlier this year, the high

growth segment was widely considered the unofficial crown jewel of the

company's portfolio. In the last few months, there was heated speculati=
on

that Novell was on the brink of selling SUSE to VMWare and selling the rest=


of the company to Attachmate. According to Mr. Schappel, several players>
beyond VMWare, like Red Hat and Microsoft, were interested in buying SUSE,<=
br>
but because Novell's businesses are tied together, when SUSE is strippe=
d out

of the equation the rest of Novell seems less valuable.



"The more interesting part of this whole discussion is: "What hap=
pened to

all the strategic buyers who we understood were part of the bidding

process?" Richard Williams, an analyst for Cross Research said. "=
There's a

lot of information in the current price and that it's only 35 cents abo=
ve

the bid by Elliott Associates."



JPMorgan Chase is advising Novell, while Skadden, Arps, Slate, Meagher &=
;

Flom is acting as legal adviser. Credit Suisse and RBC Capital Markets are<=
br>
advising Attachmate, and Jones Day is its legal adviser.