Welcome!

News Feed Item

Elliott Sends Letter to the Board of Riverbed

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.

Next Steps

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
Portfolio 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.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
Actian Corporation has announced the latest version of the Actian Vector in Hadoop (VectorH) database, generally available at the end of July. VectorH is based on the same query engine that powers Actian Vector, which recently doubled the TPC-H benchmark record for non-clustered systems at the 3000GB scale factor (see tpc.org/3323). The ability to easily ingest information from different data sources and rapidly develop queries to make better business decisions is becoming increasingly importan...
The IoT has the potential to create a renaissance of manufacturing in the US and elsewhere. In his session at 18th Cloud Expo, Florent Solt, CTO and chief architect of Netvibes, discussed how the expected exponential increase in the amount of data that will be processed, transported, stored, and accessed means there will be a huge demand for smart technologies to deliver it. Florent Solt is the CTO and chief architect of Netvibes. Prior to joining Netvibes in 2007, he co-founded Rift Technologi...
"Operations is sort of the maturation of cloud utilization and the move to the cloud," explained Steve Anderson, Product Manager for BMC’s Cloud Lifecycle Management, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Enterprise networks are complex. Moreover, they were designed and deployed to meet a specific set of business requirements at a specific point in time. But, the adoption of cloud services, new business applications and intensifying security policies, among other factors, require IT organizations to continuously deploy configuration changes. Therefore, enterprises are looking for better ways to automate the management of their networks while still leveraging existing capabilities, optimizing perf...
Security, data privacy, reliability and regulatory compliance are critical factors when evaluating whether to move business applications from in-house client hosted environments to a cloud platform. In her session at 18th Cloud Expo, Vandana Viswanathan, Associate Director at Cognizant, In this session, will provide an orientation to the five stages required to implement a cloud hosted solution validation strategy.
We're entering the post-smartphone era, where wearable gadgets from watches and fitness bands to glasses and health aids will power the next technological revolution. With mass adoption of wearable devices comes a new data ecosystem that must be protected. Wearables open new pathways that facilitate the tracking, sharing and storing of consumers’ personal health, location and daily activity data. Consumers have some idea of the data these devices capture, but most don’t realize how revealing and...
Unless your company can spend a lot of money on new technology, re-engineering your environment and hiring a comprehensive cybersecurity team, you will most likely move to the cloud or seek external service partnerships. In his session at 18th Cloud Expo, Darren Guccione, CEO of Keeper Security, revealed what you need to know when it comes to encryption in the cloud.
The cloud competition for database hosts is fierce. How do you evaluate a cloud provider for your database platform? In his session at 18th Cloud Expo, Chris Presley, a Solutions Architect at Pythian, gave users a checklist of considerations when choosing a provider. Chris Presley is a Solutions Architect at Pythian. He loves order – making him a premier Microsoft SQL Server expert. Not only has he programmed and administered SQL Server, but he has also shared his expertise and passion with b...
What are the successful IoT innovations from emerging markets? What are the unique challenges and opportunities from these markets? How did the constraints in connectivity among others lead to groundbreaking insights? In her session at @ThingsExpo, Carmen Feliciano, a Principal at AMDG, will answer all these questions and share how you can apply IoT best practices and frameworks from the emerging markets to your own business.
Basho Technologies has announced the latest release of Basho Riak TS, version 1.3. Riak TS is an enterprise-grade NoSQL database optimized for Internet of Things (IoT). The open source version enables developers to download the software for free and use it in production as well as make contributions to the code and develop applications around Riak TS. Enhancements to Riak TS make it quick, easy and cost-effective to spin up an instance to test new ideas and build IoT applications. In addition to...
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
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 in...
Extracting business value from Internet of Things (IoT) data doesn’t happen overnight. There are several requirements that must be satisfied, including IoT device enablement, data analysis, real-time detection of complex events and automated orchestration of actions. Unfortunately, too many companies fall short in achieving their business goals by implementing incomplete solutions or not focusing on tangible use cases. In his general session at @ThingsExpo, Dave McCarthy, Director of Products...
Ask someone to architect an Internet of Things (IoT) solution and you are guaranteed to see a reference to the cloud. This would lead you to believe that IoT requires the cloud to exist. However, there are many IoT use cases where the cloud is not feasible or desirable. In his session at @ThingsExpo, Dave McCarthy, Director of Products at Bsquare Corporation, will discuss the strategies that exist to extend intelligence directly to IoT devices and sensors, freeing them from the constraints of ...
WebRTC is bringing significant change to the communications landscape that will bridge the worlds of web and telephony, making the Internet the new standard for communications. Cloud9 took the road less traveled and used WebRTC to create a downloadable enterprise-grade communications platform that is changing the communication dynamic in the financial sector. In his session at @ThingsExpo, Leo Papadopoulos, CTO of Cloud9, discussed the importance of WebRTC and how it enables companies to focus...