NAI Buys Up McAfee.com Shares for $185.5M

Network Associates’ long-running attempts to pull
McAfee.com back into its fold read almost like a soap
opera — with bids, withdrawn bids, refusals and re-bids — but all that
seemed to reach its ultimate conclusion Friday, as the firm completed its
exchange offer for outstanding McAfee.com shares in a deal worth about
$185.5 million.

NAI said Friday morning that it had accepted all of the shares of
McAfee.com Class A common stock tendered by shareholders before the offer’s
expiration at midnight Thursday. It swept up 10.3 million shares, meaning
that it now controls 96 percent of McAfee.com’s outstanding capital stock,
up from the 75 percent it controlled before the exchange offer.

With the exchange offer complete, NAI said it expects to complete the
short-form merger with McAfee.com after the Nasdaq closes Friday.
McAfee.com would no longer be traded as a separate company.

“Over the last three years the McAfee.com team has moved aggressively into
the consumer market and driven the evolution of online security and
anti-virus services,” said George Samenuk, chairman and CEO of NAI.
“Network Associates will build on that success to extend those services
more deeply into the consumer, small and home office, small and medium
business, and service provider markets.”


McAfee.com finally accepted its erstwhile parent’s recombination offer late
in August, after a five-month-long battle in which NAI raised its bid three
times. McAfee.com finally relented for an offer of $8 cash and .675 of NAI
common stock for each share of McAfee.com tendered in the exchange, a price
about 81 percent higher than NAI’s original
offer in March
.

The U.S. Securities and Exchange Commission (SEC) approved the proposed
short-form merger earlier in the week, a significant move considering the
regulatory body was standing
in the way
of the merger previously.

Earlier in the year, the SEC unleashed a 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.

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