Elliott Associates Launches $3 Billion Tender Offer For Riverbed Technology

Elliott Associates launched a $3.08 billion offer to acquire Riverbed Technologies RVBD for $19 a share in cash on Wednesday January 8. Paul Singer, a veteran activist investor who oversees the $23 billion hedge fund has had a deep interest in the company which he described as “significantly undervalued.” Singer initiated a position in Riverbed back in September 2013 and disclosed a 10.4 percent stake in the company two months later. The hedge fund has met with the company's board and spoken with Riverbed CEO and co-founder Jerry Kennelly. According to Forbes “Elliott may be angling to put the company in play for another outfit to buy, but for now it is offering to purchase Riverbed itself.” The Benzinga newsdesk spoke with an analyst who did not want to be named. The analyst noted that the $19 a share offer implied 3x CY14 sales, compared to a multiple around 2.5x for similarly structured deals in the sector. As such, investors shouldn't expect a higher offer to be put on the table. A $23 to $24 offer would imply a 3.5-4x CY14 which is an “expensive” offer. The analyst sees downside risk if management does not accept the bid. The street is likely to start to value the stock on fundamentals, which indicates there are some downside risks. The analyst pointed out the fact that the company adopted a shareholder rights plan, also known as a “poison pill” back in November after Elliott Associates' disclosed a sizable position in the company. The analyst singled out a comment from Elliott Associates' letter to Riverbed's management over concern that the company has no interest in entertaining multiple bidding offers. Riverbed's board has “not indicated a desire to explore the significant acquisition interest of numerous potential bidders,” according to the letter published on Wednesday. The analyst is advising clients to use today's news announcement and strength in shares to sell. Shares of Riverbed were trading higher by more than 12 percent in the early afternoon trading session. Shares traded as high as $20.29 on Wednesday, just shy of its 52 week highs set on January 17 2012 of $20.74.