Analysts React to Elliott Associates $19 Offer to Acquire Riverbed Technology

Following Elliott Associates offer to acquire Riverbed Technology RVBD for $19 a share, several analysts published research reports.

Related: Elliott Associates Launches $3 Billion Tender Offer For Riverbed Technology

Jefferies: Negative view of Riverbed business, but that no longer matters

George Notter, analyst at Jefferies holds a neutral view on the company. Notter wrote that traditionally he had a negative vew on the company, but that no longer matters.

“From finance 101 class – an asset is worth whatever someone is willing to pay for it,” Notter wrote in an research report on January 9. If Elliott Associates wants to purchase the company for $19 a share, then that is what Notter thinks shares should be worth.

With shares currently trading above the $19 offer, investors believe that there exists the possibility of a higher bid. According to Notter “we're inclined to believe that the Board of Directors will do the right thing for shareholders and initiate a process to evaluate the sale of the business.”

Notter wrote that Riverbed getting a competing offer from another buyer is a “reasonably likely scenario.”

Shares are Hold rated with a $19 price target. If there is a competing offer, Notter has a $21 price target. A downside scenario in which the Elliott Associates deal falls through with no other offers available, shares will trade down to $14.70.

Citi: Riverbed likely to reject $19 offer

Kimberly Watkins, analyst at Citigroup C feels that Riverbed's management will reject Elliott Associates $19 offer as another bidder could offer $21 to $25 a share.

Watkins noted that a strategic buyer could even present an offer above $25 a share as the company is of interest to enterprise suppliers who could leverage distribution channels. According to Watkins, Elliott Associates could increase its offer to stay competitive in a bidding war.

Gabelli: Riverbed worth $28 in 2015

Hendi Susanto, analyst at Gabelli noted that Elliott Associates' offer of $19 a share implies a takeout multiple of approximately 2.9x sales, lower than the average networking takeout multiple of 4-6x.

At a 4x multiple, Riverbed would be valued at $26 a share. At a 6x multiple, Riverbed is worth $39 a share.

A 6x multiple is naturally high and unlikely to occur. Gabelli sees shares trading at $28 in 2015 based on 14x EV/Ebitda