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[Update 3] Novell Sells Out to Attachmate; Microsoft Gets Patents

The Seattle-based Attachmate plans to operate Novell as two business units - Novell and SUSE WordPerfect

Novell, which has been on the block for months, said Monday morning that it’s selling out to Attachmate Corporation for $6.10 a share, or roughly $2.2 billion in cash.

At the same time Novell said it’s also selling certain unidentified intellectual property to a thing called CPTN Holdings LLC, a consortium of equally unidentified technology companies organized by Microsoft, for $450 million in cash, a payment that’s cozily reflected in the $2.2 billion Attachmate is paying.

Less the $1.03 billion Novell has in the bank and the $450 million for what Novell told the SEC was 882 patents, Attachmate’s price works out to a mere $720 million.

The Microsoft-side of the news immediately sent people to the Patent and Trademark Office where they could find only 461 patents in Novell’s name going back to 1992. They also found 287 patent applications.

Presumably the IP sale will terminate Novell’s lingering antitrust lawsuit against Microsoft over WordPerfect but one really, really wonders where Novell’s contested rights to Unix are going.

Microsoft’s only got a year left on its pledge not to press patents right against Novell’s Linux operating system, but, more importantly, it’s got a problem with Google and Android, enough that it sued Motorola over its Android phone.

Anyway, the two transactions are expected to close in Q1.

Attachmate is owned by an investment group led by Francisco Partners, Golden Gate Capital and Thoma Bravo.

Novell has been looking for a buyer since March 2 when little-known Elliott Associates LLP offered to buy the joint for $5.75 a share, a price then valued at $2 billion. The offer, which Novell claimed was too low, especially since Elliott would have gotten the billion dollars Novell has in the bank, sent it scampering to find an alternative, which has proven no easy matter despite purported interest from some 20 concerns.

The Wall Street Journal claimed a couple of months ago that VMware was interested in buying Novell’s second-string Linux operating system SUSE. Now there is speculation that Microsoft wanted to stop VMware from getting its hands on SUSE and competing against Microsoft’s server- virtualization combo.

In an unusual turn of events, Attachmate issued its own separate press release about the acquisition saying that Elliott Management Corporation, father of Elliott Associates, would become an equity shareholder in Attachmate by virtue of its stock position in Novell.

According to Yahoo’s financial site Elliott owns 7.03%, making it Novell’s second-largest institutional investor.

The press release included a statement from Elliott, again raising questions about whether Elliott was a stalking horse and setting one to wondering if Microsoft wrote the entire playlet.

Elliott is quoted as saying that it’s “pleased to have been a major catalyst in this transaction, enabling Novell’s shareholders to realize substantial shareholder value. Novell has a robust product set that we believe will create a significant value opportunity as part of the Attachmate Corporation portfolio of products.”

The $6.10 a share that Attachmate and its owners have put on the table is said to represent a 28% premium to Novell’s closing price right before the Elliott offer and a 9% premium to Novell’s closing price Friday.

Novell CEO Ron Hovsepian (pictured) released a statement saying, “After a thorough review of a broad range of alternatives to enhance stockholder value, our board of directors concluded that the best available alternative was the combination of a merger with Attachmate Corporation and a sale of certain intellectual property assets to the consortium. We are pleased that these transactions appropriately recognize the value of Novell’s relationships, technology and solutions, while providing our stockholders with an attractive cash premium for their investment.”

Novell deferred further comment.

Microsoft’s deputy general counsel of intellectual property and licensing Horacio Gutierrez issued a statement saying, “We are pleased to be a part of the acquisition of certain intellectual property assets of Novell. Microsoft looks forward to continuing our collaboration with Novell into the future, to bring mixed-source IT solutions to customers.” Then Microsoft shut up.

The Seattle-based Attachmate plans to operate Novell as two business units – Novell and SUSE – and said it “will join them with its other holdings, Attachmate and NetIQ.”

Attachmate, which is supposed to compete with such as IBM, sells software to manage access to enterprise applications and databases including information stored on mainframes. Its products cover terminal emulation, host connectivity, fraud management, legacy systems upgrades, security and applications integration. SUSE claims to have a corner on the Linux-on- mainframe market.

Novell will have to pay Attachmate $60 million if it gets an unimaginably better offer. Novell told the SEC that “In certain other circumstances upon termination of the merger agreement by Novell, Attachmate will be required to pay Novell a reverse termination fee equal to $120 million.”

Provisions have been made for the patent deal to go ahead even if Attachmate doesn’t wind up with the rest of Novell and even if the substitution acquirer wants them. Worst case CPTN will still get a royalty- free, fully paid-up patent cross-license covering all of Novell’s patents and patent applications.

Attachmate is going to be looking for $425 million equity financing and $1.09 billion in debt financing to buy Novell. From what the SEC was told apparently it’s got some commitments. Looks like it’s counting on using Novell’s piggybank because Novell told the regulator that “Attachmate has represented to Novell that the net proceeds contemplated by the equity funding and debt commitment letters, together with cash and cash equivalents available to Attachmate (including cash available to Novell and its subsidiaries), will in the aggregate be sufficient for the consummation of the merger upon and in accordance with the terms and conditions of the merger agreement.”

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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