RealTime IT News

SEC Approves McAfee 'Short' Merger

Network Associates Tuesday took one step closer to its dream of bringing McAfee.com back home.

The Santa Clara, Calif.-based Web security company said it has been given a seal of approval on the deal by the Securities and Exchange Commission (SEC).

SEC officials were not available for comment.

A majority of minority shareholders in Mountain View, Calif.-based McAfee have already agreed to Network Associates last and final offer of 0.675 for a share of Network Associates common stock plus $8 in cash, without interest, for each outstanding share of McAfee.com Class A common stock.

Officials at Network Associates were not able to comment on the proceedings, but a source close to the company did say the merger should wrap up by the end of the week since the offer expires on September 12. The deal could be sealed as early as September 13.

Since Network Associates already owns 75 percent of McAfee.com, final shareholder approval this week would result in what is termed as a "short-form" merger.

The SEC's approval is significant considering the regulatory body was standing in the way of the merger.

The probe centered on Network Associates' 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.

But Network Associates restated its 1998 through 2000 financials results in late June and renewed its bid for McAfee.com on July 1, offering the same terms at lower bid price of $180 million, according to SEC documents.

The issue created a sense of mistrust by McAfee.com shareholders concerned about the true worth of Network Associates. The probe sparked an argument that saw the two sides offer and re-offer four separate times.

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. Last month, Network Associates sold its wireless and desktop PGP product lines to a newly formed startup, PGP Corp.