Enterprise software giant Novell (NOVL) has opened the door for a potential sale of itself while turning away a $2 billion bid offered by its largest shareholder, Elliott Associates. Speculating that a higher bid may come through, investors drove Novell shares to a high of $5.95 on Monday, up more than 30 cents, or 5%, than their value at Friday's close.
On Saturday, Novell CEO Ron Hovsipian called Elliott's offer of $5.75 per share, "inadequate" and said that "it undervalues the company's franchise and growth prospects." Whether Elliott will raise its offer, as S&P Equity research is predicting, remains unclear. The firm said it welcomes Novell's decision to consider selling itself but didn't hint at raising its offer. No competing offers for the Waltham, Mass.-based company have emerged.
Clifton Robbins, CEO of the private investment firm Blue Harbour Group, which own a 4% stake in Novell, echoed Hovsipian's message in a statement that said "the company's value significantly exceeds Elliott's proposal."
Hovsipian spoke to a conference of the company's customers on Monday and reiterated his view that Eliott's offer is too low. He also sought to soothe concerns about any possible business disruptions ahead. "Doing business with Novell will continue to be easy and straightforward," Hovsipian said, according to The Salt Lake Tribune.
Shareholder Value Enhancements
Despite investors' hopes of a better offer, the possibility of a white knight making one remains shaky. "Novell's disparate portfolio of software assets contains pieces that would appeal to various industry players, but it remains unclear which company would benefit enough from the aggregate bundle to throw itself into a bidding war," said Morningstar senior stock analyst Michael Holt, when the offer first became public.
In addition to selling the company, Novell's board is considering other moves to enhance shareholder value, including a stock repurchase or cash dividend, strategic partnerships and alliances, joint ventures and a recapitalization. Novell first received the Elliott's offer on March 2, but it didn't make its decision about how to respond public until late Friday, March 19.
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