Investment firm Elliott Associates and related firm Elliott International on Wednesday unveiled a bid to acquire Riverbed Technologies in a deal they said will help that company break away from what they called a slowdown in growth of the WAN acceleration market.
Elliott Associates and Elliott International, which together own 10.5 percent of Riverbed, have bid $19 per share, or about $3.1 billion, for the networking company. That is about 6 percent over the company's share price before the acquisition bid was launched. Investors expect the bid to increase, and drove the company's shares to $19.64 by the close of the trading day.
Jesse Cohn, portfolio manager for Elliott Management, the investor's umbrella organization, wrote in a Wednesday SEC filing that Elliot in September began buying Riverbed shares under the belief the company was undervalued.
Cohn, in the SEC filing, called Riverbed a "long-established company" with quality assets and that the company occupies a "mission-critical position in thousands of networks" and has "extremely loyal" customers.
"However, Riverbed's valuation has been impaired by slowing growth in its core WAN optimization market and by significant investments in both acquisitions and operating expenses undertaken to diversify away from the core WAN optimization business ... [and has] meaningfully underperformed its peers and indices over nearly every significant time period," Cohn wrote.
Elliott is prepared to devote "considerable resources" to completing its acquisition bid, he wrote.
Cohn also wrote that Elliott in November and December first approached Riverbed about an acquisition of the company, and that "Riverbed has not indicated a desire to explore the significant acquisition interest of numerous potential bidders, including us."
Cohn also wrote that Elliott will provide a 45-day "go-shop" period during which Riverbed may solicit better offers for the company.
Riverbed is very valuable to the data center, said Keith Norbie, director of server, virtualization and storage for the Eastern U.S. at Technology Integration Group (TIG), a San Diego-based solution provider and Riverbed partner.
"I've always looked at Riverbed as one of three companies that is really changing the physics of the data center," Norbie. "VMware brought virtualization to the mainstream. Data Domain brought a focus on deduplication and backups. And Riverbed changed the physics of bandwidth."
NEXT: Riverbed Going Through Big Changes, But Remains Valuable