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McAfee.com Finally Says OK to Network Associates

After five months, one withdrawn bid, and three upped offers, Network Associates appears set to acquire the 22 percent of McAfee.com it does not already own. Today, a special committee of McAfee.com's board of directors voted to recommend shareholders accept Network Associates' latest re-jiggered offer.

Two weeks ago, Santa Clara, Calif.-based Network Associates upped its offer for the Sunnyvale, Calif.-based McAfee.com shares it didn't already own to $8 in cash and .675 of a Network Associates stock. Based on yesterday's closing price, the deal would be worth $17.86, up 81 percent from the offer originally tendered in March, based on Network Associates' Wednesday closing price.

"The special committee is pleased that Network Associates has presented an offer we are able to recommend to our stockholders," Frank Gill, a special committee member, said in a statement. "McAfee.com's stockholders can now receive what we believe is a fair value for their holdings and benefit from the strategic advantages of the recombined companies."

Gill, along with McAfee.com CEO and President Srivats Sampath, had criticized Network Associates' earlier offers as severely undervaluing the company. Just a month ago, Gill expressed confidence that McAfee.com would do better as a standalone company.

In the end, the gamesmanship paid off, as Network Associates bumped up the purchase price and included approximately $96 million cash in the offer. With Network Associates' stock price down 43 percent since the offer was made, the cash greatly sweetened the deal.

As this process comes to a close we will continue our relentless focus on execution, now for stockholders of both companies," said Sampath. "I am delighted that all stockholders will be able to benefit from the upside potential of this combination."

McAfee.com's special committee noted concern about the ongoing Securities and Exchange Commission investigation of Network Associates' accounting practices. However, it concluded that deal would allow McAfee.com shareholders to sell their stock, if they were sufficiently concerned that the investigation could turn up wrongdoing.

Network Associates' CEO George Samenuk and CFO Stephen Richards submitted the SEC's required certification that the company's financial reports were complete and accurate.

McAfee.com's anti-virus products are key to Network Associates' future plans. Network Associates announced in October 2001 that it would sell off its PGP encryption and Gauntlet firewall product lines, in order to concentrate on three business areas: anti-virus software; network and application management; and Web-based service desk software. Secure Computing Corp. purchased Gauntlet for an undisclosed sum in February. Earlier this week, Network Associates sold its wireless and desktop PGP product lines to a newly formed startup, PGP Corp.