Novell’s Sale to Attachmate: The Untold Story Finally Revealed

The VAR Guy did some digging and found an SEC filing that more fully describes Novell’s pending sale to Attachmate. The filing describes how J.P. Morgan, working on Novell’s behalf, shopped Novell around to multiple bidders, and Novell mulled potential deals involving Microsoft and other unnamed companies. Novell even considered running SUSE Linux as a standalone business. Here’s the story only The VAR Guy took the time to pursue.

Overall, Novell representatives contacted 52 potential buyers. Roughly nine official bidders emerged. So how did Attachmate wind up buying the bulk of Novell’s assets? And what happened to rumored SUSE Linux bids from VMware? In a preliminary proxy statement dated December 14, Novell offers an extensive time line describing how the company’s board of directors, executive team, and external financial advisors pursued potential buyers for the company. The filing is more than 100 pages. Here are some of the highlights, paraphrased by The VAR Guy. Please note:

Regardless, some conclusions are clear:

Now… here’s a recap of the SEC filing

Chapter 1: The Unsolicited Offer

February and March 2010: Novell and Elliott Associates, a private equity fund, meet to discuss Novell’s ownership status. By March 2, Elliott Associates made an unsolicited bid to acquire Novell for $5.75 in cash. By March 20, Novell publicly declined the Elliott Associates offer and retained J.P. Morgan to help evaluate the potential sale of all or a portion of Novell.

Chapter 2: The Call for Bidders

From March through August, J.P. Morgan contacted approximately 52 potential buyers for the sale of Novell. Roughly 34 of those potential buyers participated in non-disclosure agreements with Novell. Attachmate was among those to sign the non-disclosure agreement. By May 18, it became clear that Elliott Partners and Novell were unable to enter into a non-disclosure agreement.

Chapter 3: Initial Bidders

By May 20, Novell had received nine bids for the company, including an initial Attachmate bid range of $6.5o to $7.25 per share for all outstanding shares. Bids from the eight other companies ranged from $5.50 to $7.50 per share.

Chapter 4: Mystery Players

Here’s where things get extra-interesting. Of the nine initial bidders, Novell says the bidders included Party A and Party B (apparently two technology companies) and Party C (apparently a financial buyer). Also, by June 4, a potential strategic buyer was reviewing Novell’s patent portfolio. Sometime in June or July, a mystery Party D also emerged. Party D apparently only wanted to buy a piece of Novell.

Chapter 5: Breaking Up Novell?

By July 14, Novell’s board was discussing the possibility of selling certain business assets independently as a way to potentially maximize shareholder value.

Chapter 6: Saying Goodbye

Party A drops out of the bidding process somewhere in July. Also, a potential financial buyer emerged for Novell’s collaboration solutions business, with a potential price range of $250 million to $350 million.

Chapter 7: Financial Bumps

By July 28, Attachmate informed Novell that it was having difficulty lining up financing to buy Novell. Attachmate requested permission to speak with more potential financing sources, including Elliott Associates. Also of note: Attachmate also requested the ability to discuss Novell’s open platforms solutions business (that is, the SUSE Linux business) with potential partners. By July 30, Elliott Associates was once again involved in the Novell sale discussions.

Chapter 8: Does VMware Want SUSE Linux?

From late July to early August 2010, Novell and Party D discussed the potential sale of the open platform solutions business to Party D. Hmmm… The VAR Guy’s best guess: Party D was VMware… though The VAR Guy hasn’t been able to confirm that speculation.

Chapter 9: More Bids Please

By August 11, Novell asked Party D (VMware, perhaps?) to submit a best and final offer by Aug. 16 for the open platforms solutions business. Also, Novell requested Party C (a financial firm) and Attachmate submit a best and final offer for two scenarios: (1) Buying all of Novell or (2) buying Novell excluding the open platform solutions business.

Chapter 10: Here Come the Bids

Chapter 11: One Bid For All?

By August 24, Attachmate’s offer of $5.10 per share was the only proposal to acquire the entire company that was received.

Chapter 12: Can SUSE Linux Stand On Its Own?

At that point, Novell’s board on Aug. 24 discussed operating the open platform solutions business as a standalone public company. Novell’s board decided to solicit concurrent sales for the open platform solutions business to one party and the systems/resource management, identity and security management and collaboration solutions business to another party.

Chapter 13: Four Bidders Remain?

Chapter 14: One Piece of the Deal Falls Through

From Sept. 3 through Oct. 14, Novell negotiated with Attachmate and Party B to attempt to align their respective needs. But by October 14, Party B decided against acquiring the open platform solutions business and select patents. By October 15, Party E emerges as a possible bidder for certain intellectual property.

Chapter 15: SUSE Linux: An Independent Company?

From October 15 to October 29, Novell’s board once again explored the possibility of running the open platform solutions business as a standalone company.

Chapter 16: Calling for Help

During the weeks of October 18 through October 25, Novell reached out to Microsoft, Party D (VMware?) and Party E to discuss buying Novell’s open platform solutions business or select patents. On October 21, Microsoft offered to license (or license and acquire) select patents for $100 million to $300 million.

Chapter 17: Buy Everything?

On October 21, Novell asked Attachmate to reconsider buying all of Novell, including the open platform solutions business. By October 28, Attachmate submitted a new offer to buy all Novell stock for $5.25 in cash per share. Also, Party C on October 28 proposed buying all of Novell for $5.75 per share.

Chapter 18: Patents, Please

On October 29, Microsoft, working with at least two other investors,  offered to buy certain Novell patents for $450 million. Later that day, Novell proposed to Attachmate that Microsoft would potentially acquire certain Novell patents.

On November 1, Party E proposed buying certain assets for $100 million.

Chapter 19: Two Clear Paths

By late November 1, Novell decided to enter exclusive discussions with Microsoft regarding the potential patent sale and with Attachmate regarding the sale of Novell’s business. For the next three weeks, Novell and its representatives communicated with Attachmate and Microsoft to hammer out a deal with each company.  By November 21, Novell and Attachmate finalized and executed the merger agreement. Plus, Novell and Microsoft (as a member of the Consortium) finalized and executed the Patent Purchase agreement.

Looking Ahead

Read the SEC filing and you’ll see how difficult a time Novell had trying to find a buyer that wanted all of Novell’s assets. Assuming Attachmate’s buyout of Novell gains regulatory approval, Attachmate plans to operate Novell’s SUSE Linux and Identity/Security Management operations as separate, self-contained businesses.

That’s enough speculation for one night. Thanks for reading.