NEW YORK (The Deal)--With a $3 billion buyout offer that Paul Singer's Elliott Management announced on Wednesday, Riverbed Technology (RVBD - Get Report) would join the ranks of Dell, BMC Software and Websense as another tech group that has gone private to navigate changes to the business.
The question is how receptive chairman and CEO, co-founder Jerry Kennelly, and the rest of the board will be to Elliott. When the hedge fund first took a stake in November, Riverbed adopted a shareholder rights plan.
Elliott's $19 per share bid represents a 26% premium to Riverbed's stock price before the hedge fund made a regulatory filing on Nov. 8, disclosing its position.
Shares of Riverbed raced past Elliott's buyout offer on Wednesday, gaining $1.68, or 9.41% to close at $19.53.
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The proposal includes a 45-day "go-shop" window that would allow the tech group to seek out higher bids. Other technology companies may be hard-pressed to top Elliott's bid, although other financial suitors could emerge.
Elliott portfolio manager Jesse Cohn told Riverboard's board in a Wednesday letter that waning sales in its legacy business and the cost of acquisitions and organic diversification efforts have hurt the company's valuation.
Riverbed said it would review Elliott's offer in a statement.
"There are an awful lot of venders going the way of Dell and BMC," said Ovum plc analyst Roy Illsley, regarding the trend of established technology companies going private.
San Francisco-based Riverbed sells hardware and software to large enterprises for their wide area networks. Its products address latency and bandwidth limitations in systems that cover substantial distances.
The market has leaned more heavily toward software in recent years, presenting a challenge to growth. "You can buy anybody's switch, router or controller and you can manage it from a software layer," Illsley said. Riverbed has to protect its legacy revenue stream, Illsley added, while developing its software business.