Riverbed: We don't want your steenkin' $3.1 BEELLION

Not for taking over our company, anyway, Elliot


Jerry Kenelly's Riverbed board has declined billionaire activist investor Paul Singer's Elliott Management's unsolicited bid for Riverbed.

A Riverbed statement said: "After consideration with independent legal and financial advisors, [the firm] has unanimously determined not to pursue the unsolicited proposal from Elliott Management Corporation to acquire all of the outstanding shares of Riverbed common stock for $19.00 per share, as it believes the proposal undervalues the Company and is not in the best interests of shareholders."

CEO and chairman Jerry Kenelly said: "While the Board will carefully review any credible offer made to acquire the company, any such offer must deliver value to our shareholders in excess of what we believe will be created as we execute on our growth plans and capitalise on the significant investments we have already made in that regard.

"As customers continue to adopt the full breadth of our Application Performance Platform to achieve the benefits of location-independent computing, we expect to increase our share of the $11bn application performance infrastructure market.”

That's the point really. Elliott thinks Riverbed's recent investments have been mistaken and that the road to higher shareholder value is through a company sale. Who will investors believe: Kennelly or Elliott Management?

Analyst Jason Ader of William Blair pointed out that "management appeared to leave the door open for a higher take-out offer, noting it will 'carefully review any credible offer'."

Riverbed has just announced preliminary results for its fiscal 2013 fourth quarter (ended 31 December), which are for revenue to be above previous guidance of $270m-$276m at $284m to $285m now, both on the non-GAAP measure. Kennelly said: "Sales in the fourth quarter exceeded our expectations across all major product lines and geographies."

Ader said: "While the unsolicited $19-per-share bid by activist investor Elliott Management appeared attractive based on previous Street estimates, the [results] pre-announcement raises the bar significantly and the bid appears to have been somewhat of a low-ball offer for a company beaten down from a tough calendar 2013.

"Clearly, Riverbed management believes the improved quarter rationalises its confidence in being able to execute the transition from a point-product WAN optimisation specialist to a multiproduct organisation."

These pre-announced results are apposite indeed as Kennelly is in a fight with Elliott for the soul of Riverbed and needs all the good news he can deliver to stockholders. The activist investor barbarians are at the gate and storming the walls, and Riverbed is under siege. ®

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