By the way, Oracle is a member of OIN, so it knows how it works. If it wanted to prevent patent litigation, all it had to do was buy all the patents. So I will assume they plan to use these patents, claiming they belong to the consortium and are therefore not donated to the OIN pool. Alternatively, looking at matters more positively, perhaps it wished to exercise some control over what Microsoft does with the patents.
While there used to be a @VM_gville on Twitter, as you can see in Google, as of this morning Twitter reports it no longer exists. [ Update 4: Interestingly, if you look at Google cache of VM_gville's page on Twitter, which appears to be mainly about Florida football, you see who is listed as people he's following. One is Adrian Moss, who here writes about Silverlight and the Mono Project's Moonlight project. Florian Mueller claims VM_gville gave him the tip about the German antitrust site. Seems a bit off. No doubt one day, there will be discovery in some litigation or other, and we'll find out if it's true who the tipster is and why he chose to do it in the way it has been allegedly done.]
Background to the Merger
Our board of directors and management have regularly evaluated our business and operations, our long-term strategic goals and alternatives, and our prospects as an independent company. Our board of directors and management have also regularly reviewed and assessed trends and conditions impacting Novell and its industry, changes in the marketplace and applicable law, and Novell’s competitive market position, growth and revenue potential. As part of its ongoing review of Novell and its position in its industry, our board of directors has also regularly reviewed the strategic alternatives available to Novell to enhance stockholder value, including, among other things, possible strategic combinations, acquisitions and divestitures. Novell has, from time to time, received advice from J.P. Morgan in connection with certain of these reviews and evaluations.
On February 12, 2010, the Elliott Parties, together with Elliott International Capital Advisors, Inc. (collectively, the “Elliott 13D Filers”), filed a Schedule 13D with the SEC reporting that the Elliott 13D Filers collectively beneficially owned 24,700,000 shares of our common stock, constituting 7.1% of all of the outstanding shares of our common stock.
On or about February 12, 2010, our board of directors received a letter sent on behalf of the Elliott Parties referencing the Elliott Parties’ ownership position in Novell, expressing concern about our publicly stated acquisition plan and requesting an opportunity to meet.
On February 26, 2010, Ronald W. Hovsepian, our President and Chief Executive Officer, and Dana C. Russell, our Senior Vice President and Chief Financial Officer, met with Jesse A. Cohn, Portfolio Manager of the Elliott Parties, at Novell’s offices in Waltham, Massachusetts. No material, non-public information was discussed.
On March 2, 2010, our board of directors received an unsolicited letter sent on behalf of the Elliott Parties making a conditional and non-binding proposal to acquire Novell for $5.75 per share in cash (the “Non-Binding Proposal”). The letter stated that the proposal was conditioned on a confirmatory due diligence review of us and negotiation of definitive documentation.
Also on March 2, 2010, the Elliot 13D Filers filed Amendment No. 1 to the Schedule 13D filed on February 12, 2010. In that amendment, the Elliot 13D Filers reported that they collectively beneficially owned 24,700,000 shares of our common stock, constituting 7.1% of all of the outstanding shares of our common stock, and had an economic interest in an additional 1.4% of our common stock pursuant to notional principal amount derivative agreements. That amendment described, and attached as an exhibit, the Non-Binding Proposal.
On March 2, 2010, our board of directors met telephonically to discuss the February 26, 2010 meeting of Messrs. Hovsepian and Russell with Mr. Cohn. Members of our senior management and representatives of J.P. Morgan and Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden Arps”), our outside special counsel, attended. At the meeting, a representative of J.P. Morgan made a presentation regarding background information on the Elliott Parties, including their participation in recent transactions. A representative of Skadden Arps reviewed our potential obligations under various state and federal laws with respect to activities of the Elliott Parties.
On March 2, 2010, we issued a press release in which we confirmed that we had received an unsolicited, conditional proposal from Elliott Associates, L.P. and stated that we anticipated that our board of directors would review Elliott Associates, L.P.’s proposal in consultation with our financial and legal advisors.
On March 3, 2010, our board of directors received a third letter from the Elliott Parties expressing an interest in working with us towards the signing of a definitive transaction agreement with respect to the Non-Binding Proposal and attaching a due diligence request list.
On March 10, 2010, representatives of Credit Suisse, acting as financial advisor for the Elliott Parties, called J.P. Morgan on behalf of the Elliott Parties inquiring whether there was a price per share at which Novell would grant the Elliott Parties an exclusive right to negotiate with Novell regarding an acquisition.
On March 19, 2010, our board of directors met to consider and discuss the Non-Binding Proposal and our strategic alternatives. Representatives of J.P. Morgan, Skadden Arps and members of our senior management were present at the meeting. Our management and J.P. Morgan made detailed presentation to our board of directors regarding the Non-Binding Proposal and various possible alternatives to enhance stockholder value above the Non-Binding Proposal, including a return of capital to stockholders through a stock repurchase or cash dividend, strategic partnerships and alliances, joint ventures, a recapitalization and a sale of Novell (including through negotiations with the Elliott Parties) as well as proceeding in the ordinary course with management’s plans for the business. Representatives of J.P. Morgan led the board of directors through other aspects of their presentation that included, without limitation, an in-depth review of the Elliott Parties, a review of our share performance and multiple financial scenarios with respect to Novell as they related to the Non-Binding Proposal. Representatives of Skadden Arps reviewed with the directors their fiduciary duties. After a lengthy discussion, including of J.P. Morgan’s presentation, our board of directors concluded that the Non-Binding Proposal was inadequate and not in our and our stockholders’ best interests and authorized commencing a process in which the initial focus would be on a sale of the entire company together with a thorough review of the various alternatives. Our board of directors designated Richard L. Crandall, an independent director and chairman of our board of directors, to provide board of directors’ oversight with respect to the review. In the period from March and leading to the execution of the Merger Agreement and the Patent Purchase Agreement, Mr. Crandall participated in frequent discussions with members of our senior management as well as representatives of J.P. Morgan and Skadden Arps to receive updates and to provide guidance regarding the solicitation of potential buyers and negotiation of terms of transaction agreements.
On March 20, 2010, we entered into an engagement letter dated March 19, 2010 and effective as of February 24, 2010 with J.P. Morgan, pursuant to which J.P. Morgan was engaged to provide certain financial advisory services in connection with our evaluation of various alternatives, including, without limitation, a sale
On March 20, 2010, we issued a press release announcing our board of directors’ conclusion that the Non-Binding Proposal was inadequate and stating that the Non-Binding Proposal undervalued our franchise and growth prospects. We also announced that our board of directors had authorized a thorough review of various alternatives to enhance stockholder value and stated, among other things, that our board of directors believed that an exploration of alternatives was in our and our stockholders’ best interests.
In the period from March 2010 through August 2010, in our review of the various alternatives to enhance stockholder value, J.P. Morgan contacted approximately 52 potential buyers for the sale of Novell. The potential buyers included large public technology companies based in the United States and internationally, as well as a number of financial buyers. On March 23, 2010, a representative of J.P. Morgan, acting on behalf of Novell, provided representatives of Credit Suisse, acting on behalf of the Elliott Parties, with Novell’s form of non-disclosure agreement. Potential buyers who responded favorably were asked to enter into non-disclosure agreements with us. In the period from March 2010 through August 2010, approximately 34 potential buyers executed non-disclosure agreements with us, including, on April 20, 2010, Wizard Holding.
On April 2, 2010, our board of directors met telephonically. Representatives of Skadden Arps and J.P. Morgan and members of our senior management attended the meeting. At the meeting, representatives of J.P. Morgan provided an update on its contacts with potential buyers, including both strategic and financial buyers,
the level of interest expressed by each potential buyer and the status of the execution of non-disclosure agreements with such buyers. A representative of Skadden Arps provided an update on the status of negotiations as to non-disclosure agreements with potential buyers.
On April 9, 2010, our board of directors met telephonically. Representatives of J.P. Morgan attended the meeting and provided our board of directors with an update of the process with respect to potential buyers. Representatives of Skadden Arps and members of our senior management also attended the meeting.
In April and May 2010, members of our management and representatives of J.P. Morgan and Skadden Arps engaged in periodic negotiations with the Elliott Parties and their legal and financial advisors regarding the terms of a non-disclosure agreement with respect to a possible transaction with us.
In April 2010, with the assistance of and in consultation with our advisors, we prepared a confidential information supplement for potential buyers. On April 20, 2010, J.P. Morgan began circulating the confidential information supplement to approximately 30 potential buyers who had executed non-disclosure agreements with us, including, without limitation, on April 22, 2010, Attachmate. The supplement was accompanied by a process letter instructing the recipients to submit preliminary proposals to J.P. Morgan by May 19, 2010.
Also on April 20, 2010, our board of directors held a meeting at which representatives of J.P. Morgan provided an update of the process with respect to potential buyers. A representative of Skadden Arps provided an update on the status of negotiations with the Elliott Parties of a non-disclosure agreement and reviewed the status of matters relating to our board of directors’ review of alternatives to enhance stockholder value, including the role of our directors. Members of our senior management also attended the meeting.
On May 7, 2010, our board of directors met telephonically. Representatives of J.P. Morgan attended the meeting and provided an update on its discussions and meetings with potential buyers, the status of the execution of non-disclosure agreements with such buyers and the status of the creation of a virtual data room in connection with the process. Representatives of Skadden Arps and members of our senior management also attended the meeting.
In May 2010, we authorized Attachmate to partner with two of its principal shareholders, Francisco Partners and Golden Gate (collectively with Attachmate, the “Attachmate Group”), for purposes of submitting a preliminary proposal.
On May 18, 2010, at Mr. Cohn’s request, Mr. Cohn, on behalf of the Elliott Parties, spoke with Mr. Crandall by phone. Mr. Cohn indicated to Mr. Crandall that despite the parties’ efforts, the Elliott Parties and we were unable to reach agreement on the terms of a non-disclosure agreement.
On May 19, 2010 and May 20, 2010, the Attachmate Group and eight other potential buyers submitted preliminary non-binding proposals to acquire us, including, without limitation, two strategic buyers to whom we refer to as “Party A” and “Party B,” respectively, and a financial buyer, to whom we refer as to “Party C.” The Attachmate Group’s preliminary non-binding proposal included a purchase price of $6.50 to $7.25 per share for all outstanding shares of our capital stock. The preliminary non-binding proposals received from the other eight potential buyers included proposed prices that ranged from $5.50 to $7.50 per share.
On May 25, 2010, our board of directors met to discuss the preliminary non-binding proposals received. A representative of Skadden Arps and representatives of J.P. Morgan and members of our senior management attended the meeting. At the meeting, representatives of J.P. Morgan provided an update on the process and reviewed the terms of each of the proposals. After discussion with representatives of J.P. Morgan and Skadden Arps, our board of directors agreed upon a preliminary list of five potential buyers for the next phase of the process.
On June 4, 2010, as part of the next phase of the process, members of our senior management met with a potential strategic buyer that had not submitted a preliminary proposal concerning the potential buyer’s interest in a possible transaction with us. The potential strategic buyer continued to perform extensive diligence on Novell’s patent portfolio.
On June 11, 2010, our board of directors met telephonically and discussed the preliminary proposals submitted by the potential buyers, including both strategic and financial buyers, and the progress that had been made with respect to such proposals. A representative of Skadden Arps and representatives of J.P. Morgan and members of our senior management attended the meeting.
In June and July 2010, our management worked with J.P. Morgan to solicit additional potential buyers for a sale of 100% of the outstanding shares of our common stock. J.P. Morgan also facilitated partnering opportunities for certain of the potential buyers that expressed an interest in acquiring only certain parts of Novell, including, without limitation, a strategic buyer, to whom we refer to as “Party D,” which had entered into a non-disclosure letter with us but had not submitted a preliminary proposal.
Also in June 2010, extensive presentations were given by our management to the five potential buyers included on the preliminary list of potential parties selected on May 25, 2010 to continue in the process. Representatives of the Attachmate Group met with management on June 14, 2010. Following each presentation, our management provided access for the applicable participating buyer to the virtual data room that we had created in connection with the process. Throughout the process leading to the execution of the Merger Agreement, the virtual data room was updated with new information, including, without limitation, specific information requested by the Attachmate Group and its prospective lenders as well as other potential buyers and their respective prospective lenders who had executed non-disclosure agreements with us, including, without limitation, Parties A, B, C and D.
During June 2010, members of our management and representatives of J.P. Morgan also participated in telephonic and in-person due diligence sessions with each of the participating parties and responded to numerous questions and various requests for additional information from each of these parties.
On June 29, 2010, our board of directors held a meeting at which representatives of J.P. Morgan and Skadden Arps participated. At the meeting, a representative of J.P. Morgan provided our board of directors with an update on the process and reviewed various alternatives to enhance stockholder value. In addition, representatives of Skadden Arps explained the fiduciary duties of our board of directors for the current phase of the process. Members of our senior management also attended the meeting.
On July 9, 2010, we posted two forms of a draft merger agreement to the virtual data room, one agreement providing for a direct merger and the other providing for a merger through a tender offer, for review by participating parties along with a second process letter requesting that each such participating party submit its best and final offer by July 27, 2010, together with a mark-up of one of the forms of the draft merger agreement and evidence that it had obtained commitments for any financing that it may need to complete any proposed transaction.
During July 2010, members of our management and representatives of J.P. Morgan continued to participate in telephonic and in-person due diligence sessions with participating parties and to respond to numerous questions and requests for additional information from each of these parties. In addition, at the request of certain of the potential buyers, we held extended meetings with such potential buyers both in-person and, in one instance, through videoconference.
On July 14, 2010, our board of directors held a meeting at which a representative of J.P. Morgan provided an update of the process, including the status of due diligence by each interested buyer and information regarding meetings and teleconferences scheduled with the potential buyers. Our board of directors also discussed the
possibility of selling certain businesses independently as a way to potentially maximize value to stockholders. The representative of J.P. Morgan noted several key items expressed by potential buyers in the diligence process, including potential business unit separation costs, transitional effects of key contracts and the impact of our process of reviewing strategic alternatives on current and future performance expectations. Representatives of Skadden Arps and members of our senior management also attended this meeting.
On July 23, 2010, our board of directors met telephonically. Representatives of J.P. Morgan attended the meeting and provided our board of directors with an update on the process. Representatives of Skadden Arps and members of our senior management also attended this meeting.
Prior to the July 27, 2010 process deadline, J.P. Morgan received oral indications from certain of the participating parties that they were withdrawing from the process, including, without limitation, Party A.
On July 27, 2010, J.P. Morgan received a preliminary indication of interest from a potential financial buyer for our collaboration solutions business suggesting a price range of $250 million to $350 million. J.P. Morgan received no other proposals from participating parties on this date in response to the second process letter that had been posted on July 9, 2010.
On July 28, 2010, J.P. Morgan received a letter from the Attachmate Group citing difficulties with its potential transaction financing and asking J.P. Morgan for the opportunity to speak to a broader set of partners and financing sources, including the Elliott Parties. The letter also requested the ability to discuss interest with strategic partners in our open platform solutions business.
On July 30, 2010, in light of the Attachmate Group’s request, representatives of J.P. Morgan contacted representatives of the Elliott Parties to solicit the Elliott Parties’ interest in acting as a potential financing source for a possible transaction with Novell. Thereafter, the Elliott Parties and we, through our respective advisors, resumed negotiations as to a non-disclosure agreement. On August 6, 2010, we entered into a non-disclosure agreement with Elliott Associates, L.P. pursuant to which it also agreed to standstill provisions for a period of sixty days, subject to earlier termination upon the occurrence of certain specified events.
During late July and early August 2010, certain members of our management and J.P. Morgan engaged in discussions with Party D regarding the possible sale to such party of the assets of our open platform solutions business.
On August 6, 2010, our board of directors met telephonically. Representatives of J.P. Morgan attended the meeting and provided our board of directors with an update on the process and our board of directors discussed our strategic alternatives. Representatives of Skadden Arps and members of our senior management also attended the meeting.
On August 10, 2010, the Elliot 13D Filers filed Amendment No. 2 to their Schedule 13D filed on February 12, 2010. In that amendment, the Elliot 13D Filers reported that they collectively beneficially owned 24,700,000 shares of our common stock, constituting 7.1% of all of the outstanding shares of our common stock, and had an economic interest in an additional 1.5% of our common stock pursuant to notional principal amount derivative agreements. That amendment also reported that Elliott Associates, L.P. had entered into a non-disclosure agreement with us on August 6, 2010.
On August 11, 2010, we posted a process letter to Party D, requesting that Party D submit a best and final offer by August 16, 2010 to acquire the assets of our open platform solutions business. Also on August 11, 2010, we posted a process letter to each of Party C and the Attachmate Group requesting that each submit a best and final offer by August 16, 2010 to acquire 100% of the outstanding shares of our capital stock. The letter requested that the response include a proposed purchase price for each of the following scenarios: (i) acquisition of all of our businesses and (ii) acquisition of all of Novell excluding our open platform solutions business.
On August 12, 2010, our board of directors held a telephonic meeting at which J.P. Morgan provided our board of directors with an update on the process. Representatives of Skadden Arps and members of our senior management also attended the meeting.
On August 16, 2010, J.P. Morgan received a non-binding indication of interest from Party C to acquire the assets and certain liabilities of our systems and resource management, identity and security management and collaboration solutions businesses, our businesses other than our open platform solutions business, for total consideration of $725 million to $760 million. The letter stated that Party C’s proposal was conditioned on Party C’s completion of due diligence and the negotiation of definitive transaction agreements. No financing commitments were provided with the letter.
Also on August 17, 2010, J.P. Morgan received a non-binding letter of intent from the Attachmate Group. The letter offered to acquire all of our businesses other than the open platform solutions business by means of a merger transaction for $4.50 per share in cash. The letter contained a requirement that we enter into exclusive discussions with the Attachmate Group (other than with respect to the open platform solutions business) for a period of 21 days. The letter also offered to acquire all of our businesses for $5.10 per share in cash. Our management believed that, notwithstanding the two proposals, the Attachmate Group’s preference, at that time, was to engage in a transaction for our systems and resource management, identity and security management and collaboration solutions businesses. The Attachmate Group provided a mark-up of our form of merger agreement with its letter.
On August 17, 2010, J.P. Morgan received another proposal for our collaboration solutions business from a second potential financial buyer, with a preliminary view of value between $250 million to $300 million.
On August 20, 2010, Party B submitted two different proposals. In one proposal, Party B offered to acquire between seven and eight percent of our outstanding shares of common stock in a privately negotiated transaction for $6.00 per share. In the second proposal, Party B offered to arrange a transaction through which members of a consortium would purchase our open platform solutions business and Party B would acquire certain of our issued patents and patent applications, including patents relevant to our identity and security management business (such issued patent and patent applications, the “Select Patents”), for an aggregate purchase price of between $525 million and $575 million in cash.
On or about August 20, 2010, representatives of J.P. Morgan contacted representatives of Party C to request that Party C submit a revised proposal letter, among other things, assuming the acquisition of 100% of our stock. In the early morning of August 24, 2010, J.P. Morgan received a revised indication of interest from Party C to acquire 100% of our capital stock for a purchase price equating to $4.65 per share for acquiring our businesses other than our open platform solutions business. The letter stated that Party C’s proposal was predicated on the prior sale of our open platform solutions business. The letter also indicated that Party C would submit a mark-up of our proposed form of merger agreement by the close of business on August 25, 2010.
Later that morning on August 24, 2010, our board of directors met to consider and discuss the proposals received and to discuss our strategic alternatives. Representatives of Skadden Arps and J.P. Morgan and members of our senior management attended the meeting. At this meeting, representatives of J.P. Morgan updated our board of directors on the process to solicit proposals for us and reviewed with our board of directors the parameters and status of the respective proposals received, noting that the Attachmate Group’s proposal of $5.10 per share was the only proposal to acquire the entire company that was received. In addition, J.P. Morgan detailed various strategic alternatives to the sale of Novell as a whole, including a sale of Novell in parts, a sale of certain assets with the remaining assets retained and financial repositioning. Our board of directors also discussed operating the open platform solutions business as a standalone public company. Following further discussion, analysis and consideration of the alternatives and advice presented by representatives of J.P. Morgan and Skadden Arps, our board of directors determined to solicit concurrent sales of the open platform solutions business to one party and the systems and resource management, identity and security management and collaboration solutions businesses, representing the remainder of Novell, to another party.
On August 25, 2010, J.P. Morgan distributed a form of exclusivity letter to each of Party B, the Attachmate Group and Party C, and we circulated to Party D a draft of an asset purchase agreement for the sale of our open platform solutions business.
On August 26, 2010, Party C submitted a mark-up of our form of merger agreement. On or about that same date, Party B submitted a revised proposal in which it offered to arrange a transaction through which a consortium would purchase our open platform solutions business and Party B would purchase the Select Patents for an aggregate purchase price of $550 million in cash.
On August 27, 2010, the Attachmate Group submitted a revised letter of intent. The letter included a revised purchase price of $4.80 per share in cash for acquiring our businesses other than our open platform solutions business. The Attachmate Group also included a revised mark-up of the draft merger agreement and the draft exclusivity agreement with its letter.
Also on August 27, 2010, Party C submitted a revised indication of interest, among other things, increasing its proposed purchase price to $4.84 per share for our businesses other than our open platform solutions business. Later that day, Party C submitted a further revised indication of interest increasing its proposed purchase price to $4.86 per share for our businesses other than our open platform solutions business.
On August 26, 2010, August 27, 2010 and August 28, 2010 representatives of Skadden Arps and J.P. Morgan discussed the proposals with representatives of each of Party C and the Attachmate Group and representatives of their respective legal counsel in an effort to seek improvements in the price, terms and conditions of each proposal.
On August 29, 2010, our board of directors met telephonically to continue its consideration of the Party B, Party C and Attachmate Group proposals. Representatives of Skadden Arps and J.P. Morgan and members of our senior management attended this meeting. Our board of directors discussed how our business would be divided between the buyer of our open platform solutions business and the buyer of our remaining businesses, namely our systems and resource management, identity and security management and collaboration solutions businesses and the complexity and risks of splitting assets and liabilities, establishing a post-closing relationship between the businesses to the extent required and various transition services and cross-licenses that would need to be developed and executed. The implications of selling our systems and resource management, identity and security management and collaboration solutions businesses in the absence of a consummation of a sale of our open platform solutions business was also discussed. At this meeting, representatives of J.P. Morgan provided a comparison of the proposals for our systems and resource management, identity and security management and collaboration solutions businesses submitted by the Attachmate Group and Party C in relation to, among other things, (i) the respective reverse break-up fees and specific performance terms as they related to the certainty of closing each of the proposed transactions and (ii) the financing prospects of each of the proposed transactions in the current financing market. Our board of directors also discussed the status of discussions with Party B regarding the sale of our open platform solutions business and the Select Patents.
On August 31, 2010, J.P. Morgan sent a letter to each of the Attachmate Group and Party C requesting that they confirm or revise their respective proposals on the assumption that they would not receive ownership of the Select Patents. The letter requested a response by September 1, 2010.
On September 1, 2010, Party D submitted a proposal to acquire our business other than that proposed to be acquired by the Attachmate Group and Party C, excluding assets and liabilities that may be identified but including all of our intellectual property, for an aggregate purchase price of $570 million in cash. The proposal stated that it was subject to completion of satisfactory due diligence, the negotiation and execution of definitive documentation as well as certain approvals. A member of Party D’s senior management orally advised a member of our senior management with respect to the best and final nature of the proposal.
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Also on September 1, 2010, Party B submitted a further revised proposal, in which it offered to arrange a transaction with an aggregate purchase price of $550 million in cash through which a consortium would purchase our open platform solutions business and Party B would purchase the Select Patents. We circulated to Party B a revised draft of the asset purchase agreement that had been provided to Party D, which draft reflected certain additional provisions in response to Party B’s proposal.
Also on September 1, 2010, J.P. Morgan received an indication of interest from the Attachmate Group that had been revised based on the assumption that the Attachmate Group would not acquire the Select Patents. The letter reiterated the Attachmate Group’s proposed purchase price of $4.80 per share in cash for our businesses other than our open platform solutions business. The letter indicated that the Attachmate Group’s offer would, by its terms, expire unless we entered into exclusive discussions with them for a 21 day period. On September 2, 2010 and then again on September 3, 2010, the Attachmate Group submitted revised proposals, among other things, to require exclusivity for a 24 day period and to extend the expiration date of the proposal.
In addition, on September 1, 2010, a representative of J.P. Morgan received a telephone call from a representative of Party C indicating that Party C would not be able to meet the response deadline but that, in light of the exclusion of the Select Patents, it would revise its proposal to decrease its proposed purchase price. We did not receive a further proposal from Party C until the Party C October 28 Proposal.
On September 2, 2010, our board of directors met telephonically to discuss the proposals received from Party B and Party D for our open platform solutions business. Representatives of Skadden Arps and J.P. Morgan and members of our senior management attended this meeting. Representatives of J.P. Morgan described the elements of Party D’s proposal, including, without limitation, that it related to all of Novell’s intellectual property, and compared the proposal to that received from Party B, which related to only a portion of Novell’s intellectual property portfolio. The board of directors considered, among other things, potential regulatory approval risks, the potential incompatibilities between the Party D and the Attachmate Group proposals with respect to the intellectual property proposed to be purchased by the respective parties as well as the need to include, in a sale of our businesses, a portion of our patent portfolio associated with the businesses being sold. Our board of directors also discussed and authorized our management to enter into an exclusivity arrangement with the Attachmate Group with respect to a sale of our systems and resource management, identity and security management and collaboration solutions businesses and to enter into an exclusivity arrangement with Party B with respect to a sale of our open platform solutions business and the Select Patents.
On September 3, 2010, we entered into a non-binding letter of intent with Party B with respect to its September 1, 2010 proposal. The letter of intent contained a grant of exclusivity with respect to its September 1, 2010 proposal until September 21, 2010. The exclusivity provision contained an option for Party B to extend the exclusivity period until September 28, 2010, which Party B exercised during this period.
On September 3, 2010, our board of directors met telephonically to discuss the status of discussions with Party B and the Attachmate Group. Representatives of Skadden Arps and J.P. Morgan and members of our senior management also attended this meeting. Our board of directors discussed the dynamics of a potential three party negotiation, the possibility of consummating a transaction with only one of the two buyer parties and the implications for our long-term prospects with either our open platform solutions business or our systems and resource management, identity and security management and collaboration solutions businesses surviving. Our board of directors also discussed the terms of the exclusivity with the Attachmate Group and the implications of entering into an exclusivity period. Following that discussion, our board of directors authorized our management to enter into an exclusivity arrangement with the Attachmate Group with respect to a sale of our systems and resource management, identity and security management and collaboration solutions businesses.
Following that meeting, on September 3, 2010, we entered into an agreement with the Attachmate Group with respect to its September 3, 2010 proposal granting exclusivity until September 27, 2010.
On September 9, 2010, Skadden Arps distributed to Jones Day, the Attachmate Group’s outside legal counsel, a mark-up of the draft merger agreement in response to the mark-up we received from the Attachmate Group on August 27, 2010.
During the period from September 3, 2010 through October 14, 2010, we exchanged drafts and mark-ups of the asset purchase agreement for the purchase of our open platform solutions business and the Select Patents and other related agreements with the Attachmate Group and Party B, engaged in telephonic and in-person negotiations with the Attachmate Group and Party B regarding the asset purchase agreement and related agreements. During this period, we also exchanged drafts and mark-ups of the draft merger agreement with the Attachmate Group and Party B and engaged in telephonic negotiations with the Attachmate Group regarding the draft merger agreement with respect to the sale of Novell other than the open platform solutions business and the Select Patents. The Attachmate Group and Party B and their legal and financial advisors also continued their respective due diligence investigations.
On September 21, 2010, our board of directors met telephonically. Representatives of J.P. Morgan and Skadden Arps attended portions of the meeting. Members of our senior management also attended the meeting. At the meeting, our board of directors discussed certain relationships that Gary Greenfield, one of our directors, had disclosed previously to the other directors, including Mr. Greenfield’s prior position as Chief Executive Officer of a company wholly owned by a fund of Francisco Partners, one of the principal shareholders of Attachmate, and as a former operating partner of Francisco Partners as well as Mr. Greenfield’s continuing passive interest in certain of Francisco Partners’ investment funds. Mr. Greenfield reported that he did not have definitive information as to which fund or funds of Francisco Partners might be used to finance the proposed transaction with the Attachmate Group. Our board of directors determined at the meeting, with Mr. Greenfield abstaining from such determination, that Mr. Greenfield’s continued participation in the process would be beneficial and enhance the ability of our board of directors to consider and pursue our and our stockholders’ best interests. Our board of directors further ratified his prior participation as a member of our board of directors in deliberations and decisions relative to the process. Our board of directors also discussed the status of negotiations with the Attachmate Group and Party B, alternative transaction structures and the impact of the process on us and authorized Messrs. Crandall and Hovsepian to extend the exclusivity periods with the Attachmate Group and Party B by up to two additional weeks following the expiration of each such period.
On September 27, 2010, acting pursuant to the authority provided by our board of directors, members of our senior management entered into an extension of the Attachmate Group’s exclusivity period until October 8, 2010.
On September 28, 2010, acting pursuant to the authority provided by our board of directors, members of our senior management entered into an extension of Party B’s exclusivity period until October 8, 2010. On that same date, Novell conducted an in-person meeting at a conference center in Waltham, Massachusetts with representatives of Party B and the Attachmate Group to discuss outstanding issues between Party B and the Attachmate Group with respect to the proposed asset sale and merger and attempted to align the assets, liabilities and continuing rights and responsibilities of the parties with respect to the proposed transactions. Representatives of Skadden Arps and J.P. Morgan also attended and participated in the meeting.
On September 30, 2010, our board of directors met telephonically primarily to conduct a preliminary business, financial and personnel review. The impact of the process on our business and operations and recent communications with each of the prospective buyers were also discussed. A representative of Skadden Arps and members of our senior management attended the meeting.
On October 8, 2010, our board of directors met telephonically and discussed the status of negotiations and discussions with the Attachmate Group and Party B. Representatives of J.P. Morgan and Skadden Arps and members of our senior management attended the meeting. Our board of directors also discussed the tax implications of the contemplated transactions, the status of each potential buyer’s considerations of resultant individual tax impact, the anticipated date of execution of definitive transaction documents and various
milestones and impediments to completion, alternative transaction structures, the implications of the expiration of the sixty day standstill provision in the non-disclosure agreement with Elliott Associates, L. P. and the status of the exclusivity agreements with the Attachmate Group and Party B. On that same date we entered into an extension of the Attachmate Group’s exclusivity period until October 13, 2010.
On October 14, 2010, Party B orally indicated to us that it had decided against proceeding with its proposal to acquire our open platform solutions business and the Select Patents.
On October 15, 2010, our board of directors met to discuss the status of the process. Representatives of J.P. Morgan and Skadden Arps and members of our senior management attended the meeting. Our board of directors discussed the withdrawal of Party B from the process and possible alternative transaction structures in light of such withdrawal. Our board of directors also discussed the expiration of the exclusivity period with the Attachmate Group with respect to the sale of our systems and resource management, identity and security management and collaboration solutions businesses, authorized our management to extend such exclusivity period for up to three weeks and discussed how a transaction with the Attachmate Group, in the absence of Party B, would be structured and the required analysis to determine the optimal structure. In addition, Mr. Hovsepian discussed a conversation he had on October 14, 2010, following the expiration of the exclusivity period with the Attachmate Group, with a representative of another potential strategic buyer to whom we refer as “Party E.” Party E expressed possible interest in acquiring certain of our intellectual property.
Also on October 15, 2010, following a request by the Attachmate Group for further exclusivity, we entered into a new exclusivity agreement with the Attachmate Group through October 25, 2010, pursuant to which we entered into exclusive discussions and negotiations with the Attachmate Group with respect to the Attachmate Group’s possible acquisition of all of Novell excluding Novell’s open platform solutions business and, with respect to issued patents and patent applications, including only those issued patents and patent applications identified in the exclusivity agreement.
On instruction from our board of directors, from October 15, 2010 through October 29, 2010, members of our management, with the assistance of Skadden Arps, J.P. Morgan and KPMG LLP, our tax advisor, analyzed a potential alternative structure for a sale of our systems and resource management, identity and security management and collaboration solutions businesses that would leave our open platform solutions business as a stand-alone public company (the “Alternative Structure”).
During the week of October 18, 2010, members of our senior management and representatives of Skadden Arps engaged in high-level discussions with representatives of the Attachmate Group and Jones Day regarding the Alternative Structure. On October 21, 2010, Skadden Arps circulated a draft securities purchase agreement to Jones Day that reflected the proposed terms of the Alternative Structure.
Also during the weeks of October 18, 2010 and October 25, 2010, members of our senior management solicited various potential buyers, including, without limitation, Microsoft, Party D and Party E, as to their interest in either Novell’s open platform solutions business or the Select Patents.
On October 21, 2010, we entered into a non-disclosure agreement with Party E.
Also on October 21, 2010, Microsoft submitted a non-binding letter of intent proposing to either enter into a license agreement for the Select Patents for $100 million or a license and acquisition agreement for the Select Patents for $300 million (the “Microsoft October 21 Proposal”).
On or about October 21, 2010, at the request of Mr. Crandall, Mr. Greenfield had a conversation with a representative from Francisco Partners requesting that the Attachmate Group reconsider a transaction for a sale of all of Novell, including Novell’s open platform solutions business.
On October 22, 2010, our board of directors met telephonically. Representatives of Skadden Arps and J.P. Morgan and members of our senior management attended the meeting. The board of directors heard a report on
the Microsoft October 21 Proposal. Also at the meeting, the board of directors discussed the Alternative Structure and its rationale as well its potential timing and complexities, including the post-transaction operation and valuation of a stand-alone open platform solutions business. Following a discussion on transaction alternatives, the board of directors instructed J.P. Morgan to prepare valuations for various transaction permutations, including the Alternative Structure, a concurrent sale of the Select Patents and a sale of the entire company with and without the Select Patents.
On October 24, 2010, our board of directors met telephonically as a follow-up to the October 22, 2010 meeting. Representatives of Skadden Arps and J.P. Morgan and members of our senior management attended the meeting. J.P. Morgan and members of our management presented preliminary valuations for various transaction permutations, including the Alternative Structure, a concurrent sale of the Select Patents and a sale of the entire company with and without the Select Patents, including the contingencies and assumptions associated with each.
On October 25, 2010, following a request by the Attachmate Group for an exclusivity extension, acting pursuant to authority granted by the board of directors, members of our senior management entered into an extension of the Attachmate Group’s period of exclusivity until November 1, 2010.
On October 28, 2010, the Attachmate Group submitted a revised letter of intent offering a price per share of $5.25 in cash for acquiring the entire capital stock of Novell.
Also on October 28, 2010, Party C submitted an unsolicited non-binding proposal to acquire the entire company, including all of our intellectual property. The proposal was for all of our outstanding shares of common stock at a price per share of $5.75 (the “Party C October 28 Proposal”). The Party C October 28 Proposal consisted of a proposed mark up of the form of merger agreement, a proposed limited guarantee with respect to Party C’s obligation to the pay a reverse termination fee and a request for a fourteen day exclusivity period. The proposal letter requested two weeks of additional due diligence and contemplated debt and equity financing. No debt financing commitments were provided with the letter.
In the early morning on October 29, 2010, we received a revised letter of intent from Microsoft pursuant to which Microsoft proposed to acquire, together with at least two other interested investors, certain identified issued patents and patent applications (such patents and patent applications, the “Listed Patents”) for $450 million (the “Microsoft October 29 Proposal”).
Later in the morning of October 29, 2010, our board of directors met telephonically. Representatives of Skadden Arps and J.P. Morgan and members of our senior management attended the meeting. The board of directors received an update as to progress of the Alternative Structure and the status of discussions with respect to a sale of the Listed Patents, including the receipt of the Microsoft October 29 Proposal. The board of directors discussed the feasibility of pursuing a sale of the Listed Patents in the context of a sale of the entire company, considering, among other things, Microsoft’s willingness to proceed with the Microsoft October 29 Proposal in that context and the preference that certain of Novell’s stockholders had expressed for a return of cash rather than a mix of cash and equity under the Alternative Structure. The board of directors, with the assistance of representatives of Skadden Arps and J.P. Morgan, reviewed the terms of the Party C October 28 Proposal relative to a transaction with the Attachmate Group, including, without limitation, the execution risks, anticipated timing and degree of certainty of each. A representative of Skadden Arps reviewed the fiduciary duties of the directors in analyzing potential transactions with Party C or the Attachmate Group. The board of directors discussed the possibility of seeking, prior to the expiration of exclusivity with the Attachmate Group, the Attachmate Group’s willingness to pursue, and suggested purchase price for, a possible transaction for all of Novell exclusive of the Listed Patents.
In the afternoon of October 29, 2010, we received a non-binding proposal from Party D to acquire certain assets related to businesses other than our systems and resource management, identity and security management
and collaboration solutions businesses but including certain other specified assets, including, without limitation, the Listed Patents, for a purchase price of $400 million in cash. The letter stated that the proposal was subject to the negotiation and execution of acceptable definitive agreements and satisfactory completion of due diligence.
Later that day on October 29, 2010, Mr. Crandall and two members of our senior management proposed to representatives of the Attachmate Group terms for a sale of Novell that assumed the prior purchase by Microsoft of the Listed Patents pursuant to the Microsoft October 29 Proposal. On November 1, 2010, the Attachmate Group submitted a revised letter of intent offering to purchase all of the outstanding shares of our common stock at a price per share of $6.10 in cash. The letter stated that the offer was based, among other things, on the sale of the Listed Patents for not less than $450 million and after tax proceeds from such sale of not less than $315 million.
In the afternoon of November 1, 2010, we received a non-binding expression of interest letter from Party E in exploring the purchase of the Listed Patents for a proposed purchase price of $100 million or, alternatively, a non-exclusive license to the Listed Patents. The letter stated that a transaction would be subject to satisfactory completion of due diligence and execution of mutually acceptable definitive documentation.
Later in the afternoon of November 1, 2010, our board of directors met telephonically to review the status of the negotiations with the Attachmate Group as well as the proposals received from each of Microsoft, Party C, Party D, Party E and the Attachmate Group. Representatives of Skadden Arps and J.P. Morgan and members of our senior management attended the meeting. Our board of directors discussed and received the advice of J.P. Morgan regarding the potential value for stockholders that could be realized by pursuing the respective proposals. With the advice of both J.P. Morgan and Skadden Arps, our board of directors also discussed the advantages and disadvantages of pursuing the respective proposals, including, without limitation, the risks associated with discontinuing negotiations with the Attachmate Group. The board of directors determined to enter into exclusive discussions with Microsoft with respect to Microsoft’s October 29 Proposal and to continue exclusive discussions with the Attachmate Group with respect to its November 1, 2010 proposal.
On November 2, 2010, Skadden Arps circulated a draft of a merger agreement to Jones Day that reflected the most recent discussions between the Attachmate Group and us, as well as provisions with respect to a concurrent transaction as described in the Microsoft October 29 Proposal.
During the period from November 2, 2010 through November 21, 2010, we and representatives of Skadden Arps exchanged drafts and mark-ups of the draft merger agreement and engaged in telephonic negotiations with the Attachmate Group and its legal advisors regarding the draft merger agreement. During this period, we continued to extend the exclusivity rights of the Attachmate Group in one, two and three day increments through November 19, 2010, after which we continued negotiations on a non-exclusive basis. During this time, the Attachmate Group, its prospective lenders and their respective legal advisors also continued their due diligence investigations.
On November 3, 2010, a representative of Skadden Arps and certain of our internal legal counsel met in-person in Seattle, Washington with representatives of Microsoft and Gonzalez Saggio & Harlan LLP (“Gonzalez Saggio”), intellectual property legal counsel for Microsoft, to discuss and negotiate the terms of the patent sale described in Microsoft’s October 29, 2010 proposal to a consortium of interested investors being organized by Microsoft (the “Consortium”). Representatives of the Attachmate Group and Jones Day also attended and participated in the meetings. Discussions and negotiations with Microsoft, as a representative of the Consortium, and Microsoft’s representatives, including Sullivan & Cromwell LLP, transaction legal counsel for Microsoft (“Sullivan & Cromwell”), and Gonzalez Saggio, continued in person through November 8, 2010 and telephonically through November 21, 2010. During this time, certain of our internal legal counsel and management also participated in telephonic and in-person due diligence sessions concerning the Listed Patents with legal counsel to the Consortium members, and responded to questions and requests for additional information from each of these parties regarding the Listed Patents.
We granted Microsoft as a representative of the Consortium an initial period of exclusivity with respect to the negotiations and discussions regarding the Listed Patents from November 3, 2010 through November 7, 2010 and continued to extend the exclusivity period through November 19, 2010, after which we continued discussions and negotiations on a non-exclusive basis.
In the morning of November 5, 2010, our board of directors met telephonically to review the status of the negotiations with the Attachmate Group and the Consortium. Members of senior management and a representative of Skadden Arps and representatives of J.P. Morgan attended the meeting. A representative of Skadden Arps described key issues under consideration with respect to the proposed merger and the proposed purchase of the Listed Patents. A representative of J.P. Morgan advised the directors that the Attachmate Group had not yet provided detailed information as to the structure and conditions of the Attachmate Group’s proposed financing for the merger.
Later in the day on November 5, 2010, Jones Day circulated initial drafts that had been prepared by Kirkland & Ellis LLP, outside counsel to Attachmate and certain of its equity holders in respect of debt and equity financing matters relating to the proposed merger, of a form of equity commitment letter pursuant to which certain investors would provide equity financing for the merger and a form of limited guarantee pursuant to which certain of the equity investors would agree to guarantee the payment of the reverse termination fee and indemnities related to Novell’s financing cooperation and repatriation obligations under the Merger Agreement. On November 6, 2010, the Attachmate Group circulated a draft of a debt commitment letter.
On November 8, 2010, the Attachmate Group circulated a revised draft of the debt commitment letter. In the evening of November 8, 2010 and the afternoon of November 9, 2010, members of our senior management and representatives of J.P. Morgan and Skadden Arps held telephone calls with members of the Attachmate Group, Kirkland & Ellis LLP and Jones Day regarding the terms of the debt commitment letter and requested further information regarding the Attachmate Group’s sources and uses of funding with respect to the proposed merger.
In the evening on November 9, 2010, our board of directors held a telephonic meeting at which it considered a further extension of the Attachmate Group’s exclusivity right, current transaction prospects with respect to the Attachmate Group’s financing of any transaction and the state of negotiations with Microsoft, as a representative of the Consortium. Representatives of Skadden Arps and J.P. Morgan and members of our senior management attended the meeting.
During the period from November 10, 2010 through November 20, 2010, we, together with representatives of Skadden Arps and J.P. Morgan, exchanged drafts and mark-ups and continued to negotiate telephonically with the Attachmate Group and its legal advisors the terms of the debt commitment letter, form of equity commitment letter and form of limited guarantee concurrently with the negotiation of the draft merger agreement and, on November 18, 2010, Kirkland & Ellis LLP provided a copy of a draft voting agreement between Attachmate and the Elliott Parties. We did not discuss with the Attachmate Group the nature or extent of the Elliott Parties’ involvement in the Attachmate Group’s proposed financing, including as to the Elliott Parties’ use of shares of Novell common stock as an element of the financing.
On November 12, 2010, our board of directors held a meeting to discuss progress in the negotiations with Microsoft, as a representative of the Consortium, and the Attachmate Group. Representatives of Skadden Arps and J.P. Morgan and members of our senior management attended the meeting. Prior to this meeting, the members of the board of directors were provided with summaries of the current terms of the drafts of the patent purchase agreement and the merger agreement. Representatives of Skadden Arps reviewed the terms with the directors. In addition, a representative of J.P. Morgan delivered an update with respect to the status of the Attachmate Group’s debt financing. The board of directors discussed the complexities of the respective negotiations and of the relationship between the proposed transactions. Following the discussion, the board of directors authorized Novell’s management to extend the periods of exclusivity with the Attachmate Group and Microsoft, as a representative of the Consortium.
On November 12, 2010, November 15, 2010, November 17, 2010 and November 20, 2010, members of our senior management, together with representatives of Skadden Arps and J.P. Morgan and Mr. Crandall participated in extensive telephonic negotiations with members of the Attachmate Group and representatives of Jones Day regarding issues raised in the draft merger agreement mark-ups and related financing documents. Among the principal issues discussed were the termination and reverse termination fee amounts, the circumstances under which either party could terminate the draft merger agreement and receive a fee and the term of the Attachmate Group’s debt financing commitments. Also during this period, Mr. Crandall, on behalf of our board of directors, continued to negotiate certain terms of the draft merger agreement, including the amount of the termination fee and reverse termination fee, with representatives of the Attachmate Group.
On the morning of November 21, 2010, our board of directors held a special meeting, which members of our senior management and representatives of Skadden Arps and J.P. Morgan, attended. Prior to this meeting, the members of the board of directors were provided with materials related to the proposed merger and the proposed patent sale. At the meeting:
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representatives of Skadden Arps reviewed with the board of directors its fiduciary duties in considering the proposed transactions;
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the board of directors reviewed the developments in the negotiations with the Attachmate Group and Microsoft, as a representative of the Consortium, including the terms of the draft merger agreement and the draft patent purchase agreement and the changes that had been effected to each document since the last board of directors meeting, including the issues raised with respect to the negotiation of the terms and conditions under which the reverse termination fee would be payable;
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the board of directors considered the positive and negative factors and risks in connection with the proposed transactions, as discussed in the section entitled, “The Merger – Reasons for the Merger and Recommendation of Our Board of Directors” below; and
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a representative of J.P. Morgan made a financial presentation and rendered to the board of directors its oral opinion, subsequently confirmed in writing, that as of November 21, 2010, and based upon and subject to the various factors, assumptions, qualifications and limitations set forth in the written opinion, the $6.10 per share to be received by holders of shares of Novell common stock pursuant to the proposed merger was fair, from a financial point of view, to such holders as discussed in “The Merger – Opinion of Our Financial Advisor.” Such opinion is attached hereto as Annex C.
Following a lengthy and detailed discussion, the board of directors instructed us and our advisors to continue negotiations with respect to terms and conditions under which the reverse termination fee would be payable. The board of directors determined to adjourn the meeting until later in the afternoon on November 21, 2010 to allow for the negotiations on this issue to progress. Following the adjournment of the meeting, we and our advisors contacted the Attachmate Group and Jones Day to negotiate a potential compromise.
Later in the afternoon of November 21, 2010, the board of directors reconvened the special meeting, at which members of our senior management and representatives of Skadden Arps and J.P. Morgan attended. The board of directors reviewed discussions with the Attachmate Group and Jones Day regarding the terms and conditions under which the reverse termination fee would be payable. Following a detailed discussion of these matters and following careful consideration of the proposed merger agreement and the patent purchase agreement and the transactions contemplated by those agreements, with Mr. Greenfield abstaining due to Mr. Greenfield’s relationship with Francisco Partners previously disclosed to the board of directors, the board of directors (1) approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement, (2) declared that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger, on the terms and subject to the conditions set forth therein, are in the best interests of the stockholders of Novell and (3) approved the patent purchase agreement, the patent sale and the other transactions contemplated by the patent purchase agreement. With Mr. Greenfield abstaining, the board of directors resolved to recommend that Novell’s stockholders approve and adopt the Merger Agreement
and the transactions contemplated thereby, including the merger. The board of directors authorized the appropriate officers of Novell to finalize and execute the merger agreement, the patent purchase agreement and related documentation.
During the course of the late evening of November 21, 2010, we and representatives of Skadden Arps, Jones Day, and the Attachmate Group finalized and executed the Merger Agreement and the limited guarantees, and we and representatives of Skadden Arps, Gonzalez Saggio, Sullivan & Cromwell, and Microsoft, as a representative of the Consortium, finalized and executed the Patent Purchase Agreement.
On the morning of November 22, 2010, we issued a press release announcing the execution of the Merger Agreement and the execution of the Patent Purchase Agreement.
