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Elliott Associates and Novell: All About a Game of Cat and Mouse

Mar 04, 2010, 18:03 (9 Talkback[s])
(Other stories by Andy Updegrove)

"But these other chess players do have their own advantages. First up, no one at Novell is going to want to be acquired by Elliott. Why? Because Elliott will almost certainly want to break Novell up and sell the pieces. Indeed, while it has offered $2 billion for Novell, it has already acquired over 8% of Novell at a significant discount off that per-share bid number. And Novell has almost $1 billion in cash. So the rewards of a quick hit, followed by a quick breakup, make far more sense than trying to turn around the business of a company that has been struggling to reinvent itself for over 15 years.

"What that means is that one would imagine that Novell's talent will be heading for the exits in droves if the Elliott bid looks like it might succeed. Even if Elliott convinces the target that it plans to run the Company in the long term, the prospect of being managed by a fund with a reputation as a "Vulture Capitalist" better known for buying distressed third world debt is hardly likely to inspire loyalty.

"This, of course, will lower the sale value of the business units that Elliott would be hoping to sell, and damage any remaining units that it might choose to continue to run for any period of time. Indeed, for this reason unsolicited tender offers for technology companies, even by other technology companies, were almost unknown until IBM made a hostile tender for Lotus in 1995. IBM made a major effort to make that combination work, and largely succeeded. But hostile offers remain rare in technology for this reason."

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