Novell Buys SilverStream for $212 Million

For fiscal 2002, Internet infrastructure company SilverStream, based in Burlington, Mass., has the potential of contributing about 1 percent to total Novell revenue. In fiscal 2003, SilverStream is projected to take away slightly from Novell earnings.

Provo, Utah-based Novell expects the deal to boost its earnings in 2004. With an expected closing of the acquisition in July, the company's fiscal third quarter, Novell projects SilverStream will not materially affect revenue and ongoing expenses in that quarter.

Novell says it will launch a cash tender offer for all of the outstanding common shares of SilverStream, followed by a merger in which the remaining holders of SilverStream will receive the same cash price.

The total estimated value of the deal assumes the transaction will close in July, with about 23.6 million shares projected to be outstanding, which includes estimated option exercises prior to the closing date.

If its closing projections are correct, Novell expects SilverStream's balance sheet to have total cash of about $100 million, which will yield a net cash outlay by Novell of about $112 million.

The boards of each company have unanimously approved the acquisition. David Litwack, president and chief executive of SilverStream, and certain other SilverStream shareholders have agreed to tender their shares, representing about 20.3 percent of the common shares outstanding.

The tender offer requires that at least a majority of the fully diluted shares be tendered.

With acceptance of the tender offer by shareholders representing 90 percent of SilverStream shares, the acquisition will likely close in July, Novell says.

If less than 90 percent of the shares are tendered, a formal stockholder meeting of SilverStream stockholders will be necessary to approve the transaction, and the acquisition will likely close during the fourth quarter.

SilverStream will become a Novell unit and, following the closing, SilverStream's Extend product line will be rebranded under the Novell name.

Novell says the acquisition increases Web services offerings, enabling it to compete with IBM, Microsoft and Sun Microsystems.

For the fiscal year ended Oct. 31, the company reported a loss of $261.8 million, or 79 cents a share, including items, on sales of $1.04 billion. Excluding items, the company earned 4 cents a share.

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