Nov. 22 (Profile facts) -- Novell Inc., the maker of Linux operating-system software, agreed to be bought by Attachmate Corp. for $2.2 billion, ending an 8-month strategic review aimed at reviving a company that had struggled to sustain growth.
Novell investors will get $6.10 a share, Attachmate, a software company owned by private-equity firms including Golden Gate Capital Corp., said today in a statement. That’s 9.1 percent more than Novell’s closing price on Nov. 19. Novell will also sell some intellectual-property assets to a group of technology companies led by Microsoft Corp. for $450 million.
The company, which has reported sales declines for three of the past four years, had trouble competing against larger rivals such as Microsoft, said Rich Williams, an analyst at Cross Research. Novell started looking at strategic alternatives including a sale after rejecting a $2 billion takeover offer in March from shareholder Elliott Associates LP as inadequate.
“Management had struggled over the last few years to grow the new businesses and that created an opportunity given all of the cash from the balance sheet for financial bidders,” said Livingston, New Jersey-based Williams, who rates Novell “hold” and doesn’t own the stock. “The financially oriented buyers are going to hold the company, reshape it to a degree and then in a few years, in a more attractive environment, bring the company public.”
Novell’s new products were too “underdeveloped” to attract other technology companies as bidders, making it a suitable target for financial buyers, Williams said. Attachmate, whose owners also include Francisco Partners and Thoma Bravo LLC, said Novell products will complement a portfolio that includes other technology assets.
Novell, based in Waltham, Massachusetts, rose 37 cents, or 6.6 percent, to $5.96 on the Nasdaq Stock Market at 12:04 p.m. New York time. It had gained 35 percent this year before today.
The company, which also competes against Oracle Corp. and BMC Software Inc., has said last year’s recession hurt customer orders. The company had $1.04 billion in cash and short-term investments at the end of the third quarter.
Besides Linux, Novell’s business units include identity and security management, systems and resource management, workload management and its GroupWise e-mail system. Microsoft declined to comment on the assets it bought from Novell, said Tricia Payer, a spokeswoman for the company.
As part of the deal, fund manager Elliott will become a shareholder in Attachmate. New York-based Elliott was one of several parties in a 2006 buyout of Metrologic Instruments Inc., a maker of bar-code scanners. Elliott helped fund the 2009 acquisition of MSC.Software Corp. by private-equity firm Symphony Technology Group LLC.
The purchase price for Novell is 28 percent higher than the company’s stock price before Elliott’s March bid. The average premium acquirers offered for software companies in the past 12 months was 21 percent, with businesses that make software for enterprises the most popular targets, according to a Bloomberg analysis of more than 1,000 deals.
Attachmate and Novell said they expect to complete the deal in the first quarter. Credit Suisse and RBC Capital Markets are acting as the financial advisers for Attachmate, and Jones Day is the legal adviser. JPMorgan Chase & Co. and Skadden, Arps, Slate, Meagher & Flom LLP advised Novell.
Private-equity firms pool money from investors to take over companies, financing the purchases mostly with debt, with the intention of selling them later for a profit.
Francisco Partners was part of a group of investors that sold chipmaker Numonyx Holdings BV to Micron Technology Inc., the biggest U.S. producer of computer memory, for $1.34 billion this year. Francisco Partners invests in technology companies and manages about $5 billion, according to its website.
San Francisco-based Golden Gate Capital manages $9 billion, according to its website. The firm’s deals include the acquisition of Geac Computer Corp. for $794.2 million in 2006.
Thoma Bravo, which has offices in San Francisco and Chicago, bought United Parcel Service Inc.’s UPS Logistics Technologies unit for an undisclosed amount last week. It acquired SonicWall Inc., an Internet-security firm, for $484.9 million in July.