Anti-virus software firm McAfee.com
has rejected a $208
million all-cash offer from majority owner Network Associates, describing
the buyout bid as “financially inadequate.”
The share e
xchange offer, which was set to commence Monday, called for Network
to acquire each outstanding share of McAfee.com
stock in exchange for 0.675 of a share of Network Associates stock.
But, after a special committee of McAfee’s board perused the bid, it
dismissed the offer as financially inadequate and urged shareholders to take
no action on the bid.
The buyout offer, which was described as an attempt to streamline operations
and eliminate confusion across business units, was also described by McAfee
as “opportunistically timed and inconsistent with the Special Committee’s
objective of enhancing stockholder value.”
The spurning of the offer is a blow to Network Associates, which was looking
to effect a “short-form” merger of McAfee with one of its subsidiaries. The
Santa Clara, Calif.-based Network Associates provides anti-virus, network
management, and help desk software.
McAfee, which retained Morgan Stanley & Co., as its independent financial
advisor, said it concluded that the $208 million stock offer would
“significantly undervalue” its long-term value as a stand-alone company
Web security services to consumers and small businesses.
McAfee, which has headquarters in Sunnyvale, Calif., also decried the lack
of opportunity to do financial due diligence on the offer.
In rejecting the offer, the company said it also considered the “the lack of
certainty with respect to the proposed exchange offer because of the ability
of Network Associates to terminate an offer based on a change in prospects
of Network Associates or McAfee.com, and Network Associates’ ability to
waive a condition to its proposal that, after the closing of the proposal,
Network Associates would own at least 90% of the outstanding common stock of
The PC security firm, which was spun off from Network Associates in 1999,
said the proposed 0.675 exchange ratio represents an approximate 20.6
percent and 24.9 percent discount from McAfee.com’s March 18, 2002 trailing
60-day and 90-day average closing price. It would also represent an
approximate 22.1 percent and 30.6 percent discount from the average exchange
ratio of McAfee.com and Network Associates over the 60-day and 90-day
periods ending March 18, 2002.
McAfee, which competes with the likes of RSA Security, Trend Micro and
Symantec, sells virus protection subscriptions online. It counts more than
1.3 million paid active subscribers.