RealTime IT News

McAfee Buyout Bid Back in Play

Despite earlier indications it would cancel plans to buy out the remaining shares of McAfee.com it does not already own, Network Associates announced Friday it would press ahead with the hostile tender offer.

Network Associates , which spun off McAfee in 1999 to take advantage of the surge in dot-com stocks, said the exchange offer of 0.675 shares for each outstanding share of McAfee stock, would begin Friday and expire on April 12.

In a statement, the Santa Clara, Calif.-based security software firm said the original offer represents a premium of almost 20 percent. Based on the $27.61 per share closing price on March 15, the date the exchange offer was announced, the deal was valued in the vicinity of $208 million.

McAfee, which sells anti-virus products on the Internet, has already rej ected the bid as "financially inadequate," arguing that it would "significantly undervalue" its long-term value as a stand-alone company selling Web security services to consumers and small businesses.

The latest move by Network Associates just adds to the hubbub surrounding company. On Tuesday, the company saw its stock take a nosedive after announcing a for mal SEC investigation into its accounting practices.

In announcing the probe, Network Associates chairman and CEO George Samenuk said the McAfee buyout bid would be suspended and revisited once the cloud of the SEC probe is lifted. "At that time, we'd have to review our offer based on the stock prices of both companies," he said.

The SEC probe, which Samenuk believed was limited to accounting practices during fiscal year 2000 when a $120 million sales shortfall and shareholder lawsuits over its revenue recognition policy forced a top-level management shakeup.

The lawsuits, which are still pending, have accused Network Associates of "channel stuffing," where revenues were recognized for products sold into the distribution channel, which were subject to return. Samenuk took control of Network Associates in January 2001, after those events.

Network Associates said the decision to acquire the remainder of McAfee.com was an attempt to streamline operations and eliminate confusion across business units.

"This recombination is intended to deliver on the promise we made 14 months ago to focus Network Associates on customer needs, eliminate confusion across business units, and streamline our operations," according to Samenuk.

"We believe this move is good for customers, allowing us to combine the powerful Network Associates security technologies with the innovative services and distribution offered by McAfee."

Should the buyout bid go through, Network Associates would own at least 90 percent of all outstanding shares of McAfee.com common stock. Upon consummation, Network Associates said it would effect a "short-form" merger of McAfee.com with a Network Associates subsidiary.