Elliott Management raises offer for network gear maker Riverbed to $3.36 bn

26 Feb 2014

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Activist US hedge fund Elliott Management yesterday raised its offer for network gear maker Riverbed Technology Inc by 9 per cent to $3.36 billion and said that it would not raise any further until it is allowed to conduct due diligence.

Elliott, which holds 10.5 per cent stake in Riverbed, has raised its offer to $21 a share in cash, up from $19 a share.

Last month, Riverbed had rejected the New York-based hedge fund's $19 a share or $3.08 billion offer, calling it inadequate.

In a letter to Riverbed's board, Elliot hauled up the company board for not showing any interest to selling although potential have shown interest in bidding. "We believe shareholders, the actual owners of the company, should be outraged by the Board's behavior. The Board has been ignoring numerous potential buyers, and has also bizarrely concluded that it is not worthwhile to allow these parties, including Elliott, to conduct a few weeks of diligence to put forth our highest and best offers for the company."

''This behavior is inconsistent with the fiduciary responsibilities of a public company board, whose obligation is to maximize value for stockholders,'' the letter added.

Elliot did not say who the potential buyers were, but its offer includes a "go shop" provision that allows Riverbed to solicit other offers.

Riverbed responded by saying that it was considering Elliott's revised offer, hinting that this too may be rejected as its turnaround strategy has worked, which was evident from its recently reported strong fourth quarter results, as well as an improved outlook for the first quarter of fiscal 2014.

Riverbed's sales for the first time grew in single digits last year and the company has forecast growth of 3.5-6.per cent for the current quarter. It attributed the slowdown mainly in its main wide-area network optimisation business Opnet, which it acquired in 2012 for around $1 billion.

Founded in 2002, California-based Riverbed's main product is the Steelhead Appliance, a networking appliance that combines several techniques to optimise data traffic and bandwidth utilisation across a wide area network.

It has over 24,000 customers include 97 per cent of the Fortune 100 and 95 per cent of the Forbes Global 100 companies, and an annual turnover of more than $1 billion.

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