Network Associates renews contested bid for McAfee

By : |March 30, 2002 0



SAN FRANCISCO: Computer security provider Network Associates Inc. on Friday
pushed forward with its contested plan to buy the rest of anti-virus software
McAfee.com Corp. for about $210 million, a price McAfee’s directors have already
rejected as too low.

Network Associates renewed the bid three days after it delayed the offer and
disclosed its fiscal 2000 accounting practices were being investigated by the
Securities and Exchange Commission.

"We wanted to give the market the opportunity to absorb the information
before going ahead with the offer," Steve Richards, chief financial officer
at Santa Clara, California-based Network Associates, told Reuters. "There’s
no certainty when the SEC will commence the questioning or conclude the
questioning. It could go on for quite some time."

The renewed offer, which is due to expire at midnight April 25, would give
McAfee.com shareholders 0.675 shares of Network Associates common stock for each
outstanding Class A McAfee share. McAfee.com’s board has 10 business days to
file their position with the SEC, Richards said. McAfee.com executives did not
return a call seeking comment.

If the tender offer and merger are completed, McAfee.com will become a wholly
owned subsidiary of Network Associates and McAfee.com shares will no longer
trade publicly. Based on Network Associates’ closing price of $24.20 on
Thursday, the deal was valued at about $209.4 million, according to a Network
Associates spokeswoman. The markets were closed Friday for the Good Friday and
Passover holidays.

Network Associates spun McAfee.com off three years ago but continues to own
about 75 percent of the company. McAfee.com sells subscriptions to antivirus and
PC management services. "We’re looking forward to having this back as one
company, eliminating overlap in some of our product offerings and being the
strongest offering to consumer market," Richards said.

Standing by
McAfee.com said on Sunday that its board had rejected Network Associates’
original March 16 bid, calling it "financially inadequate." On Monday,
Network Associates stood by its offer, saying it was confident the offer would
be well received by shareholders.

Network Associates, which competes against Symantec Corp., has been
reorganizing its operations since chief financial officer Steve Richards and
chairman and CEO George Samenuk came on board in early 2001.

The March 26 disclosure of the SEC probe, while believed to focus on the
practices of Network Associates’ previous management team, sparked an 11 percent
drop in the company’s share price that day and led two Wall Street analysts to
cut their ratings on the stock.

But the share price recovered somewhat in following days, after dipping to a
low of $22.23 Tuesday after the announcement of the SEC investigation.
McAfee.com’s also rallied this week.

When Network Associates first made the offer, it said it represented a 20
percent premium on McAfee.com stock. "So they’ve gotten the premium in the
open market in anticipation of our offer," said Richards.

Network Associates has said it believes the probe is focused on the company’s
method in 2000 of booking revenues when products were shipped to distributors
instead of when customers bought them. The company announced that it was
changing that practice in December 2000, the same day it announced a revenue
shortfall and the resignation of its top three executives.

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