Seattle's Attachmate acquiring Novell in $2.2B deal

Seattle-based Attachmate is buying network software maker Novell for $2.2 billion.

Under the deal, announced Monday, Novell shareholders will receive $6.10 cash per share.

As part of the sale agreement, a group of technology companies organized by Microsoft called CPTN is buying 882 patents for $450 million in cash.

"This acquisition will add significant assets to our current portfolio holdings, and the Novell and SUSE brands will allow us to deliver even more value to customers," Jeff Hawn, chairman and chief executive of Attachmate, said in a statement.

"We have great respect for Novell's business, its employees and its commitment to customers. Moreover, we look forward to maintaining and further strengthening Novell and SUSE solutions to meet market demands," Hawn said.

SUSE Linux is an operating system held by Novell.

Attachmate, a privately held company that also makes network software, declined to comment by phone. It also declined to give specifics about the patents Microsoft will acquire as part of the CPTN consortium.

Microsoft also declined to describe the patents it is buying from Novell. Microsoft competes intensely with Linux-based open-source software, especially in its Server and Tools business.

The combined companies will make more than $1 billion a year in sales, according to Attachmate.

In the quarter ended July 31, Novell reported a profit of $16 million and sales of $199 million.

It will continue to run as a separate business, according to Attachmate.

Novell has reported sales declines for three of the past four years and has had trouble competing against larger rivals such as Microsoft, said Rich Williams, a Livingston, N.J.-based analyst at Cross Research. It started looking at strategic alternatives, including a sale, after rejecting as inadequate a $2 billion takeover offer in March from shareholder Elliott Associates.

"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 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," he said.

Attachmate has 925 employees and Novell has 3,450.

Asked whether there would be layoffs, Attachmate President Bob Flynn said in a statement, "Because both companies are mature organizations, there will be some natural overlap in functions that will provide us opportunities for increased efficiencies, process improvement and cost savings both in the short and long term."

Attachmate plans to finance the purchase by seeking $425 million in equity financing and $1.1 billion in debt financing, according to documents filed with the Securities and Exchange Commission.

Attachmate is owned by an investment group led by Francisco Partners, Golden Gate Capital and Thoma Bravo. It expects to close the sale in the first quarter of 2011.

Novell has had numerous courtroom battles with Microsoft in its history.

It was a key player in persuading the Federal Trade Commission and the Department of Justice to investigate Microsoft for potential antitrust violations. It did the same in Europe with the European Union.

It has sued Microsoft multiple times over competitive practices involving Novell's NetWare products and WordPerfect software, which Novell once owned.

But the two settled their differences in 2006, with Microsoft agreeing to promote Novell's Linux software.

Novell's stock closed at $5.96 Monday, a 6.6 percent increase from Friday's close.

Information from Bloomberg News was included in this report. Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com