Elliott Management Corporation ("Elliott") today sent a letter to the
Board of Directors of Riverbed Technology (NASDAQ:RVBD) reporting that
Elliott has received overwhelmingly supportive feedback from
shareholders and equity analysts for the idea that Riverbed should fully
explore Elliott's offer to acquire Riverbed, as well as the other
acquisition interest that exists. After speaking with a majority of
Riverbed's shareholder base, the feedback highlights the following:
Elliott, affiliates of which collectively own or have economic exposure
to approximately 10.5% of the common stock and equivalents of Riverbed
Technology, Inc., is a multi-strategy investment firm with deep
experience investing in public and private companies.
Full text of the letter follows:
"January 14, 2014
Riverbed Technology, Inc.199 Fremont StreetSan Francisco,
California 94105Attn: Jerry Kennelly, Chief Executive Officer and
Chairman of the Board
Dear Members of the Board of Directors:
On behalf of Elliott Associates, L.P. and Elliott International Limited
(collectively, "Elliott" or "we"), the owners of 10.5% of the common
stock and equivalents of Riverbed Technology, Inc. ("the Company" or
"Riverbed"), I wanted to thank you in advance for consideration of our
offer and of this additional note. We strongly believe that our $19
offer and "go-shop" structure provide compelling value for shareholders,
and our team and advisors are enthusiastically looking forward to moving
ahead with our offer and negotiation of definitive documentation.
The purpose of this short note is to offer a few additional thoughts in
advance of your Board meeting later this week. We understand you will be
discussing how and whether to proceed with our offer, and we thought
sharing some of the feedback we have received would add value to your
The feedback we have received falls primarily into two categories:
feedback from shareholders, and feedback from independent equity
research analysts and informed media. Regardless
of the source, the feedback we have received has been overwhelmingly
supportive of the idea that Riverbed should fully explore our offer and
the other acquisition interest that exists.
The balance of this note lays out in more detail what we have seen and
heard from others regarding our offer and concludes with our thoughts on
Riverbed's paths ahead.
Shareholders Support Exploring Our Offer and
Since the initial filing of our 13D in November, we have been inundated
with phone calls from Riverbed shareholders, both new and longstanding.
This feedback has only intensified over the last five days. At this
point, we have had dozens of conversations and have heard from a
majority of Riverbed's shareholder base. Feedback was varied and
thoughtful, but primarily conformed to the following thoughts:
Numerous shareholders also had thoughtful views on Riverbed's execution
to date, stock price performance and path forward. Without opining on
these matters ourselves, it is worth nothing that many of the
shareholders we spoke with volunteered that they support a sale process
because they are frustrated by historical execution and skeptical of the
Company's plan and ability to execute in the future.
This context is important for the Board to keep in mind when evaluating
Riverbed's next steps. Rejecting the idea of a sale evaluation and
instead offering shareholders assurances that the Company has a plan for
generating value as it moves into a difficult and uncertain future is an
extremely risky proposition. The feedback we've received suggests that
Riverbed would find shareholder patience for such assurances at an
Equity Research Supports and Expects Pursuit of
Equity research analysts have generally followed Riverbed for years, and
they talk frequently with their clients who are Riverbed shareholders.
Their views both reflect the views of the shareholder base and influence
current and prospective shareholders.
Elliott believes it reviewed all of the research that was published
regarding our offer for the Company. From this review, it is apparent
that equity research analysts overwhelmingly ruled in favor of our
offer, highlighting the compelling value for shareholders and the
opportunity for a sale process that could yield a higher offer.
The quotes were illustrative and echoed many of the sentiments we heard
repeatedly from shareholders:
"Elliott Mgmt has offered to acquire RVBD for $19/share, an
attractive offer in our opinion…" - UBS, January 8, 2014
"Elliott's $19.00 RVBD bid represents 2.9x our forward year revenue
and we see it as fair." - Lake
Street Capital Markets, January 8, 2014
"We believe Riverbed is an attractive
acquisition target…" - Gabelli & Company, January 9, 2014
"We believe Riverbed remains an attractive
LBO candidate, given its depressed operating margin and
stable cash flow, as services adds stability at 40% of revenue" -
Citigroup, January 9, 2014
"We give Riverbed an M&A rank of 1,
seeing a high probability (30-50%) of a transaction, and weight our M&A
value 30% (reflecting the probability implied by this ranking) within
our price target methodology." - Goldman Sachs, January 8, 2014
"We see this bid as a good deal for investors
as Riverbed's core WANOP business has stagnated and new growth
opportunities like Granite remain unproven." - J.P. Morgan, January
"Overall, we believe investors loudly
applaud a sale with open arms given the continued headwinds
and inconsistent operating performance witnessed over the past year in
the core WAN optimization business." - FBR, January 8, 2014
"A takeout offer for Riverbed will now force the company to think
hard about initiating a formal sale process. With an interested buyer, we
don't believe the company can ignore exploring a sale process for long."
- Oppenheimer, January 8, 2014
"Elliott already has a 10.5 percent economic interest, many long-term
holders are dissatisfied, and the bid will attract arbitrage investors
looking for a quick sale. This sort of pressure is hard for any board to
ignore. Setting a formal sale process in motion could also give [Jerry]
Kennelly, who is approaching retirement age, a
chance to help define his legacy." - Reuters
BreakingViews, January 8, 2014
"In total, we're inclined to believe that
the Board of Directors (including Jerry Kennelly) will do the right
thing for Riverbed shareholders and they'll initiate a process to
evaluate the sale of the business." - Jefferies,
January 9, 2014
To recap, a diverse set of leading equity research analysts who have
followed this company, have witnessed its past execution and understand
its valuation reacted to our bid by stating that:
These views are straightforward and compelling, and they
represent the investing community's clear expectations about what comes
next for Riverbed. This point is worth emphasizing to rule
out the idea that Elliott's involvement in the stock merely "shined a
light on" or "drew attention to" the Company, attracting new investors
whose interest is unrelated to our proposals for creating value.
That simply isn't the case. The quotes above clearly illustrate the
expectations that have generated new interest in the stock. If those
expectations were to be upended by whatever the Company chooses to do
next, we believe many of the investors that so quickly came into the
stock would just as quickly leave, and Riverbed's stock price would
revert back to where it was trading last October.
In the wake of our offer, Riverbed can choose one of two paths:
A) Engage with Elliott and the other interested buyers by helping them
conduct efficient due diligence in order to deliver binding, premium
offers for the Company that the Board can then evaluate as being in the
best interests of the shareholders; or
B) Publicly reject Elliott's offer, decline to show any interest in
evaluating a sale and put forward Riverbed's stand-alone growth
initiatives as the superior path to value despite having failed to
investigate acquisition interest in the Company. Riverbed may cite its
current quarter, if good, and/or issue optimistic guidance in
Path A allows Riverbed to engage with the interested parties and to
conduct a competitive process to solicit the highest offers possible for
the Company. Riverbed could then understand what definitive offers exist
and thoughtfully evaluate the merits of those offers relative to the
alternatives. Based on its conclusions at that point, Riverbed would be
in an informed position to determine which course of action would
maximize value in shareholders' best interests.
By contrast, Path B deprives shareholders of the opportunity to explore
a certain and substantial premium in favor of sight-unseen assurances
from Riverbed that it has a plan that will lead to a better outcome.
Shareholders and the Street are already skeptical of Riverbed's ability
to execute, and given that Riverbed has missed Street revenue or EPS in
four out of the last five quarters and backed away from its
"illustrative" plan at the same Analyst Day where it was mentioned, we
believe choosing Path B would expose shareholders to substantial and
immediate downside risk.
As significant shareholders, it is our sincere hope that Riverbed's
Board will decide to pursue Path A by running a process that includes
Elliott. The feedback we have heard from other shareholders and from the
Street leads us to believe that this is their sincere hope as well. As
Riverbed considers what is best for its owners, the shareholders, we
believe the evidence is overwhelming that Path A would lead to a
value-maximizing outcome while avoiding the substantial downside risks
associated with Path B.
We again wanted to thank Riverbed's Board for considering our offer. We
are eager to get started on diligence and to work expeditiously to enter
into a binding agreement to acquire the Company. As always, I am happy
to make myself available to answer any questions you may have.
Very truly yours,
Jesse A. CohnPortfolio Manager"
Cautionary Statement Regarding Forward-Looking Statements
The information herein contains "forward-looking statements." Specific
forward-looking statements can be identified by the fact that they do
not relate strictly to historical or current facts and include, without
limitation, words such as "may," "will," "expects," "believes,"
"anticipates," "plans," "estimates," "projects," "targets," "forecasts,"
"seeks," "could," "should" or the negative of such terms or other
variations on such terms or comparable terminology. Similarly,
statements that describe our objectives, plans or goals are
forward-looking. Our forward-looking statements are based on our current
intent, belief, expectations, estimates and projections regarding the
Company and projections regarding the industry in which it operates.
These statements are not guarantees of future performance and involve
risks, uncertainties, assumptions and other factors that are difficult
to predict and that could cause actual results to differ materially.
Accordingly, you should not rely upon forward-looking statements as a
prediction of actual results and actual results may vary materially from
what is expressed in or indicated by the forward-looking statements.
About Elliott Management Corporation
Elliott Management Corporation manages two multi-strategy hedge funds
which combined have more than $23 billion of assets under management.
Its flagship fund, Elliott Associates, L.P., was founded in 1977, making
it one of the oldest hedge funds under continuous management. The
Elliott funds' investors include pension plans, sovereign wealth funds,
endowments, foundations, funds-of-funds, high net worth individuals and
families, and employees of the firm.
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