|By Business Wire||
|January 14, 2014 08:44 AM EST||
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:
- Riverbed shareholders and equity analysts are strongly in favor of Riverbed initiating a process to explore the significant acquisition interest that exists from all parties, including Elliott.
- Riverbed is an excellent candidate for acquisition.
- Shareholders and equity analysts were skeptical of Riverbed’s ability to execute should Riverbed choose not to explore a sale and believed the stock would return to the $14-$15 range in such a scenario.
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 Street
San Francisco, California 94105
Attn: 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 discussion.
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 Other Interest
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:
- Riverbed should explore Elliott’s offer and any other credible interest
- Riverbed should attempt to solicit the highest price possible for the Company
- Should Riverbed not do so, the stock would return to the $14-$15 range
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 all-time low.
Equity Research Supports and Expects Pursuit of a Process
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 8, 2014
“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:
- Our bid represents an attractive offer for the Company
- Riverbed is an excellent candidate for acquisition
- Riverbed shareholders are applauding the idea of a sale process, because it represents a good deal for them
- Riverbed should run a process to explore the significant acquisition interest that exists, including Elliott’s
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 conjunction.
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. Cohn
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.
Many private cloud projects were built to deliver self-service access to development and test resources. While those clouds delivered faster access to resources, they lacked visibility, control and security needed for production deployments. In their session at 18th Cloud Expo, Steve Anderson, Product Manager at BMC Software, and Rick Lefort, Principal Technical Marketing Consultant at BMC Software, discussed how a cloud designed for production operations not only helps accelerate developer inno...
Feb. 19, 2017 09:15 AM EST Reads: 1,481
Almost two-thirds of companies either have or soon will have IoT as the backbone of their business. Though, IoT is far more complex than most firms expected with a majority of IoT projects having failed. How can you not get trapped in the pitfalls? In his session at @ThingsExpo, Tony Shan, Chief IoTologist at Wipro, will introduce a holistic method of IoTification, which is the process of IoTifying the existing technology portfolios and business models to adopt and leverage IoT. He will delve in...
Feb. 19, 2017 09:15 AM EST Reads: 1,001
"We host and fully manage cloud data services, whether we store, the data, move the data, or run analytics on the data," stated Kamal Shannak, Senior Development Manager, Cloud Data Services, IBM, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Feb. 19, 2017 09:15 AM EST Reads: 5,021
As cloud adoption continues to transform business, today's global enterprises are challenged with managing a growing amount of information living outside of the data center. The rapid adoption of IoT and increasingly mobile workforce are exacerbating the problem. Ensuring secure data sharing and efficient backup poses capacity and bandwidth considerations as well as policy and regulatory compliance issues.
Feb. 19, 2017 09:15 AM EST Reads: 1,551
SYS-CON Events announced today that Conference Guru has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. A valuable conference experience generates new contacts, sales leads, potential strategic partners and potential investors; helps gather competitive intelligence and even provides inspiration for new products and services. Conference Guru works with conference organizers to pass great dea...
Feb. 19, 2017 07:45 AM EST Reads: 1,668
SYS-CON Events announced today that LeaseWeb USA, a cloud Infrastructure-as-a-Service (IaaS) provider, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. LeaseWeb is one of the world's largest hosting brands. The company helps customers define, develop and deploy IT infrastructure tailored to their exact business needs, by combining various kinds cloud solutions.
Feb. 19, 2017 07:30 AM EST Reads: 1,394
"When you think about the data center today, there's constant evolution, The evolution of the data center and the needs of the consumer of technology change, and they change constantly," stated Matt Kalmenson, VP of Sales, Service and Cloud Providers at Veeam Software, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Feb. 19, 2017 06:45 AM EST Reads: 5,353
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, discussed the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
Feb. 19, 2017 05:45 AM EST Reads: 4,719
Zerto exhibited at SYS-CON's 18th International Cloud Expo®, which took place at the Javits Center in New York City, NY, in June 2016. Zerto is committed to keeping enterprise and cloud IT running 24/7 by providing innovative, simple, reliable and scalable business continuity software solutions. Through the Zerto Cloud Continuity Platform™, organizations can seamlessly move and protect virtualized workloads between public, private and hybrid clouds. The company’s flagship product, Zerto Virtual...
Feb. 19, 2017 05:45 AM EST Reads: 806
WebRTC defines no default signaling protocol, causing fragmentation between WebRTC silos. SIP and XMPP provide possibilities, but come with considerable complexity and are not designed for use in a web environment. In his session at @ThingsExpo, Matthew Hodgson, technical co-founder of the Matrix.org, discussed how Matrix is a new non-profit Open Source Project that defines both a new HTTP-based standard for VoIP & IM signaling and provides reference implementations.
Feb. 19, 2017 05:00 AM EST Reads: 4,662
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound e...
Feb. 19, 2017 04:00 AM EST Reads: 10,970
We all know that data growth is exploding and storage budgets are shrinking. Instead of showing you charts on about how much data there is, in his General Session at 17th Cloud Expo, Scott Cleland, Senior Director of Product Marketing at HGST, showed how to capture all of your data in one place. After you have your data under control, you can then analyze it in one place, saving time and resources.
Feb. 19, 2017 03:00 AM EST Reads: 3,815
Cognitive Computing is becoming the foundation for a new generation of solutions that have the potential to transform business. Unlike traditional approaches to building solutions, a cognitive computing approach allows the data to help determine the way applications are designed. This contrasts with conventional software development that begins with defining logic based on the current way a business operates. In her session at 18th Cloud Expo, Judith S. Hurwitz, President and CEO of Hurwitz & ...
Feb. 19, 2017 03:00 AM EST Reads: 1,533
SYS-CON Events announced today that Linux Academy, the foremost online Linux and cloud training platform and community, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Linux Academy was founded on the belief that providing high-quality, in-depth training should be available at an affordable price. Industry leaders in quality training, provided services, and student certification passes, its goal is to c...
Feb. 19, 2017 02:30 AM EST Reads: 754
910Telecom exhibited at the 19th International Cloud Expo, which took place at the Santa Clara Convention Center in Santa Clara, CA, in November 2016. Housed in the classic Denver Gas & Electric Building, 910 15th St., 910Telecom is a carrier-neutral telecom hotel located in the heart of Denver. Adjacent to CenturyLink, AT&T, and Denver Main, 910Telecom offers connectivity to all major carriers, Internet service providers, Internet backbones and exchanges.
Feb. 19, 2017 02:30 AM EST Reads: 1,284