McAfee.com spurns buyout bid

"Financially inadequate" is what the antivirus services company says of the $211 million buyout offer from its parent, Network Associates. Spoiled child, or is the bid too low?

Aug. 16, 2002 3:24 a.m. PT

2 min read

Antivirus services company McAfee.com has rejected a $211 million buyout offer from its parent computer security provider Network Associates as too low, McAfee said.

Sunnyvale, Calif.-based McAfee said late Sunday that a special committee of the board of directors and its advisers Morgan Stanley had determined Network Associates' March 16 offer to acquire each outstanding Class A McAfee share for 0.675 shares of Network Associates stock was "financially inadequate."

The special committee said the buyout proposal was "opportunistically timed," inconsistent with its goals for the company, and made at a discount to McAfee's share price.

The proposed exchange ratio would value McAfee at about $17.78 per share, based on Network Associates closing stock price Friday of $26.34 on the New York Stock Exchange. That represents a 7.6 percent discount from McAfee's closing price Friday of $19.25 on the Nasdaq.

The deal, valued at about $220 million at the time it was announced, was worth $210.7 million as of last Friday's closing prices, based on the exchange of 8 million Network Associates' shares for 11.7 million McAfee.com shares.

McAfee said the special committee also took issue with Network Associates' ability to terminate the deal if either company's prospects changed, feeling instead the offer "significantly undervalues the long-term value inherent in McAfee.com as a standalone company."

Under the offer, Network Associates would buy the 25 percent of McAfee it does not already own. It spun off McAfee in 1999, raising about $75 million.

At the time of the initial offer McAfee recommended its shareholders not make a decision on a tender offer until the special committee had made a recommendation to the company.

McAfee maintained that stance Sunday, urging its shareholders to wait on a decision on the tender offer until it makes its formal position public.

The exchange offer, which Network Associates is taking straight to McAfee shareholders, is set to commence Monday.

Network Associates has said it made the offer to eliminate confusion in the marketplace and expand its consumer services.