A nope from Novell

Contact: Brenon Daly

The only surprise about Novell turning down the unsolicited $2bn offer from Elliott Associates was the timing. In an unorthodox move, the software vendor said ‘thanks, but no thanks’ to the hedge fund on Saturday morning, when most thoughts were turning to a full day of March Madness. (And what a maddening day it turned out to be, at least for people who filled out their brackets with top seeds: On Saturday, teams seeded No. 1, No. 2 and No. 3 all got sent packing.)

In dismissing the bid, Novell’s board of directors said the offer from Elliott of $5.75 for each share ‘undervalues’ the company and its growth prospects. As an aside, we’re not exactly sure what growth Novell is referring to. The vendor has come up short of Wall Street revenue estimates for both quarters of its current fiscal year so far, and sales this fiscal year, which ends in October, will almost certainly come in below the $862m it recorded last fiscal year. Revenue in the following fiscal year is also likely to come in below last fiscal year, at least according to Wall Street projections.

Even without much top-line excitement, Novell does nonetheless have some valuable assets: A bankable $600m maintenance revenue stream, a decent Linux business and probably the fourth-largest portfolio of identity and access management technology. Of course, its most attractive property is its treasury, which is stuffed with a cool $1bn in cash and short-term investments.

And finally, we would note that Novell does have an experienced adviser in JP Morgan Securities as it explores options to enhance shareholder value. In just the past 10 months, JP Morgan has worked with two other long-in-the-tooth software companies that have been targeted in publicly contested M&A processes. Both Borland Software and MSC Software ended up getting sold, with Borland going for a whopping 50% higher than the initial bid.

Former PC buyer focuses on InFocus

Contact: Brenon Daly

Having already played a central role in much of the recent consolidation of the PC industry, John Hui has shifted his attention to another segment of the tech hardware market: digital projectors. Hui on Monday unveiled a take-private plan for long-suffering InFocus, offering 95 cents for each of the 41 million shares of the digital projector maker. The board of directors, which includes an activist shareholder, has signed off on the $39m tender offer. The bid will go out within two weeks and needs two-thirds of shareholders to support it. (InFocus management and the company’s largest shareholder, who holds 12% of the company, have agreed to back the buyout.)

Hui founded and took public eMachines in 2000. Shares traded underwater after the offer and Hui, advised by Los Angeles-based boutique Averil Capital Markets Group, took the company private the following year in a $161m deal. Hui then turned around and sold eMachines to Gateway for some $256m in early 2004. Following the sale, Hui held a large stake of Gateway and looked to expand that through an unsolicited offer for Gateway’s retail PC division in 2006. Instead, Acer picked up Gateway for $710m in cash in 2007. Shortly after that deal closed, the combined Acer/Gateway acquired Hui’s 75% stake in European PC vendor Packard Bell.

For all of the buying and selling over the past decade, Hui has tapped Averil founder Diana Maranon, a former banker at Wasserstein Perella & Co. (remember that firm?) and lawyer at Skadden Arps. On the other side, InFocus retained a trio of bankers (Blake Kim, Brian Sapp and Seth Ferguson) from Thomas Weisel Partners. The mandate actually dates back to mid-December, when the company hired TWP to help it evaluate an unsolicited approach.