Elliott Management and Riverbed Technology
Elliott Management, the $24 billion activist hedge fund firm run by billionaire Paul Singer, initiated new positions in Juniper Networks (JNPR), Companhia de Saneamento Basico (SABESP), Anadarko Petroleum Corp. (APC), and Time Warner Inc. (TWX). The fund sold its stake in Melco Crown Entertainment (MPEL) and increased its position in Riverbed Technology (RVBD).
Elliot added 8,231,946 shares to its Riverbed Technology (RVBD) stake in the fourth quarter. Network equipment maker Riverbed accounts for a 6.04% position in Elliot’s portfolio, according to the latest 13F filing. Including derivatives, Elliot has a 10.5% stake in Riverbed.
Paul Singer’s fund first disclosed a 9% stake in Riverbed in November, and urged the company to implement “value-maximizing operational, capital structure and strategic review initiatives.” Elliot offered to buy Riverbed in January for $3.08 billion, or $19 per share, in an effort to initiate a bidding war for the company. Elliott also has a “go shop” provision in its offer under which Riverbed’s board can seek competing bids. After Riverbed turned down the $19 a share takeover bid, Elliot raised the offer price last month to $21.00 per share in cash, saying the new offer “demonstrates our commitment to the value-maximizing potential of Riverbed’s high-quality assets and its strategic positioning within its markets.”
Elliott portfolio manager Jesse Cohn added in a public letter:
- “It also represents our deep and abiding skepticism that a maturing technology company whose efforts to diversify have resulted in significant lost value and whose stock has underperformed virtually every relevant benchmark over any time period since its (initial public offering) can offer superior value to stockholders on a publicly traded, stand-alone basis.”
Riverbed rejected the offer, as it “believes the proposal undervalues the Company and is not in the best interests of shareholders.” The company’s board of directors approved a $250 million increase to the share repurchase program first announced August 19, 2011. The total authorized repurchase amount under the program is now $750 million.
Elliott issued the following statement:
- “Riverbed’s announcement today of an increased buyback program is more clear evidence of the Board’s entrenchment. Riverbed’s shareholders want and expect the Board to explore a value-maximizing sale, not to reflexively announce a buyback when the stock is up 35% on buyout speculation. Instead of engaging interested buyers, the Board has once again confirmed that it is focused on the wrong issues and desperately searching for any tactic that will allow it to retain control over a public Riverbed. The correct path forward is for the Board to allow all interested buyers, including Elliott, to conduct diligence so they can present shareholders with their best offers for the Company.”
FBR’s Daniel Ives, cited by various news reports, believes Elliott Management’s new $21-per-share offer for Riverbed amounts to a stalking horse bid meant to drive up the company’s valuation. Ives expects Riverbed to eventually sell to a private equity firm for $24 to $25 per share.
Riverbed reported an improvement in its results with $283 billion in sales in the fourth quarter of 2013, a 19% year-over-year increase. It posted $8 million in net income or $0.05 per diluted share up from $5 million, or $0.03 per diluted share, in 4Q 2012. The company’s revenue growth was sluggish in 2013 due to the slowdown in its main wide-area network (WAN) optimization business. Riverbed has also faced struggle to integrate Opnet, an application performance management (APM) vendor, which it acquired in 2012 for about $1 billion.
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