Snubs Network Associates… Again

In the soap opera that is Network Associates’ unsolicited bid to buyback , there is only one certainty. Committee members Rick Shell and Frank Gill are not giving up control of the company at a discount.

“This deal is tremendously undervalued,” said CEO Srivats Sampath. “We are basically saying that either NAI can pay the premium or we can act on our own.”

Monday, Network Associates, which already owns about 78 percent of, sweetened its offer to purchase the rest of Mountain View, Calif.-based’s outstanding shares for to 0.90 per share. That’s 15.5 percent better over the previous offer of 0.78 per share.

But in looking over the offer, a special committee and the board of directors of last night scoffed at the revised numbers and recommended that stockholders reject Network Associates’ offer and not go along with the proposal.

“The special committee is highly confident in both the near-term and long-term prospects for as a standalone company, and for these reasons, we believe that the current exchange offer significantly undervalues the long-term prospects of,” said Frank Gill.

The vote now goes before the shareholders on July 30. If Network Associates can gain a majority of the minority of approximate 12 million outstanding shares, the company can opt for a short form merger based on a 90 percent control of

When the vote is counted, Network Associates said it expects to hear the sounds of champagne popping.

“We think the shareholders will take a look at the offer and find it to be attractive,” said Network Associates general counsel Kent Roberts. “There was too much confusion in the market about the name and our MacAfee product line. This deal is about a more unified approach.”

The on again – off again – on again deal has been peppered with traps and pitfalls.

This is the second time since the buyout was announced that McAfee has held back on the offer. In April, the company advised shareholders to await a recommendation from its board of directors before acting on the bid, which at the time had been bumped up from its original $210 million price tag to $224 million.

A month earlier, Santa Clara, Calif.-based Network Associates had said it would suspend the buyout bid because of an ongoing SEC investigation into its accounting practices.

However, because the SEC investigation could go on for a long time, the company reversed that decision and press ahead with plans for the acquisition.

The formal SEC probe reportedly centers 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 on July 1, offering the same terms at lower bid price of $180 million, according to SEC documents.

So what does Network Associates stand to gain except total control of the MacAfee name? How about’s two hot properties: SecurityCenter and SpamKiller, which are good sellers for the anti-virus maker.

Or how about customer contacts? Since leaving the Network Associates nest, has done well on its own including inking distribution and marketing deals with AOL and Microsoft .

Of course, these are the same reasons that McAfee says are why they want more money for their technology and contacts.

As for any predictions on the outcome of the vote or folding back into Network Associates, Sampath is reluctant to guess.

“We will have to see what happens with the shareholders,” Sampath said. “At the end of the day, we know we have given them proper guidance that we feel is best for us and the products we provide. Ultimately though, they are calling the shots.”

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