McAfee Buyout Bid Back in Play

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

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
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

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
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 common stock. Upon
consummation, Network Associates said it would effect a “short-form” merger
of with a Network Associates subsidiary.

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