Investment company Elliott Management has offered to buy WAN optimization vendor Riverbed Technology for just over $3 billion while giving Riverbed a chance to entertain higher bids.
Elliott started buying Riverbed stock last September and now owns about 10.5 percent of the company, according to an offer letter sent Wednesday that Riverbed filed with the U.S. Securities and Exchange Commission. Elliott said growth is slowing in Riverbed's core business and the company's efforts to diversify so far have hurt its value.
Riverbed's core products are appliances that help enterprises use expensive wide-area networks more efficiently. In recent years, the San Francisco company has acquired other businesses to expand its offerings, most notably buying Opnet in 2012 for about $1 billion for its tools to gauge and manage the performance of applications and networks. In addition to its Steelhead WAN optimization appliances, Riverbed now offers the Stingray line of application delivery controllers and Granite cloud computing technology.
Elliott's buyout plan includes a "go-shop" provision that would let Riverbed's board seek competing bids for a period after it reached a deal with Elliott.
"We are aware that numerous parties have expressed acquisition interest in Riverbed, and this structure guarantees that the Company will secure a healthy premium for its stockholders while holding open the opportunity to obtain an even higher premium," the letter said.
Elliott is offering to buy all of Riverbed's stock for $19 per share. Riverbed has about 162 million shares outstanding. The New York investment company said its offer represents a 29 percent premium over Riverbed's stock price before Elliott started buying large numbers of shares, a move that Elliott said has driven up Riverbed's shares.
In the quarter ended Sept. 30, Riverbed posted revenue of $262 million, up 20 percent from a year earlier, and a profit of $3.8 million, down from $24.7 million.
Elliott said it has long been involved with IT and networking companies. It was part of a consortium led by Bain Capital and Golden Capital that bought systems management vendor BMC Software last year for $6.9 billion.
In midday trading on Wednesday, Riverbed's shares were up $1.95 at $19.80.