Elliott Makes $2 Billion Bid To Take Novell Private

One of Novell's top investors on Tuesday made a $2 billion offer to take the Linux and IT management software vendor private.

The investor, Elliott Associates and its wholly owned subsidiaries, wrote in a letter to Novell that it wishes to acquire all of Novell's shares at a price of $5.75 per share, which early Tuesday represented a 49 percent premium. The total value of the acquisition would be about $2 billion.

The letter was made public in an SEC filing on Tuesday.

Elliot and its subsidiaries owned about 7.4 percent of Novell's shares before the publication of the letter.

In the letter, signed by Jesse A. Cohn, a portfolio manager at Elliott, the investment firm wrote that Novell has for several years tried to diversify with an unsuccessful series of acquisitions and changes in strategic focus.

"As a result, we believe [Novell's] stock has meaningfully underperformed all relevant indices and peers. With over 33 years of experience in investing in public and private companies and an extensive track record of successfully structuring and executing acquisitions in the technology space, we believe that Elliott is uniquely situated to deliver maximum value to the Company's stockholders on an expedited basis," Cohn wrote.

Novell was the pioneer in developing hardware and software for networking, but lost the fight over the future of operating systems to Microsoft. Since then, Novell has focused on open source software, and is the developer of the SUSE Linux operating system and of software for virtualization and cloud computing.

The company last week reported a profit of $20 million, or 6 cents per share for its first fiscal quarter of 2010, up from the $11 million or 3 cents per share it reported for the first quarter of 2009. However, revenue in the first quarter of 2010 was reported as $202 million, down from the $215 million it reported last year.

Investors were in favor of Elliott's offer, and sent Novell's shares soaring on Tuesday to reach over $6 per share in after-hours trading, up over 26 percent for the day. With share prices now higher than the per-share offer made by Elliott, investors were signaling their belief that the price for Novell is subject to negotiation.