Elliott Management is using its trusted playbook to force another technology company into a sale.
The hedge fund offered on Wednesday to buy Riverbed Technology, a maker of networking equipment and software, for $3.2 billion, in hopes of pushing the company into selling itself.
Under the terms of its proposal, Elliott would pay $19 a share, a 6.4 percent premium to Tuesday’s closing price and a 26 percent premium to when it first disclosed a position in the stock.
“By any measure, we believe our proposal represents a compelling opportunity that your stockholders will find extremely attractive,†Jesse Cohn, a portfolio manager at Elliott, wrote in a letter to Riverbed’s board.
The hedge fund already owns about 9.1 percent of the company’s outstanding shares, and it has economic exposure to an additional 1.5 percent through derivatives.
Shares in Riverbed were up 10 percent by midday on Wednesday, at $19.70, as investors bet that a higher offer was in the offing.
A representative for Riverbed wasn’t immediately available for comment. The company has been working with bankers at Goldman Sachs, a longtime adviser.
The company has become the latest target of Elliott, which has made a lucrative business of getting technology providers to sell themselves. The hedge fund, and Mr. Cohn in particular, have succeeded in helping to catalyze the sales of the likes of BMC Software, Novell and Blue Coat in recent years.
It’s a time-tested move in the activist hedge fund playbook, one that the veteran Carl C. Icahn has frequently employed.
Now, Elliott has set its eyes on Riverbed, whose offerings are meant to speed up wide-area networks. The stock price of the nearly 12-year-old Riverbed has stayed roughly flat for more than a year, as growth in its core products has slowed while spending on research and development has risen.
The hedge fund first began buying shares in Riverbed several months ago, disclosing a 1.4 percent stake in November. In his letter to the company’s board, Mr. Cohn wrote that he had met with directors, including the founder and chief executive, Jerry Kennelly, to urge a sale.
“Though this mostly private dialogue has been amicable, we have become concerned that Riverbed has not indicated a desire to explore the significant acquisition interest of numerous potential bidders, including us,†the hedge fund executive wrote.
While Mr. Cohn wrote that he was prepared to pay up, he tipped his hand by noting that Elliott’s offer included a “go-shop†provision that would let the networking company seek potentially higher takeover bids. The investment firm has already heard from a number of private equity firms and strategic competitors of Riverbed’s that have expressed interest in potentially making a bid, a person briefed on the matter said.
“This structure guarantees that the company will secure a healthy premium for its stockholders while holding open the opportunity to obtain an even higher premium,†he wrote.
Elliott would prefer to participate in any takeover, even if it played a junior role, this person added.
