Jake Widman
Tuesday, 07 April 2009 00:11
Business IT -
Technology
Page 1 of 2
According to reports in the Wall Street Journal and the New York Times, Sun turned down a formal acquisition offer from IBM on Saturday. On Sunday, IBM withdrew its offer, and on Monday, Sun's stock dropped 23 percent.
Last month,
IBM opened negotiations with Sun Microsystems to buy the longstanding workstation manufacturer for US$6.5 billion, about twice its market value. Since then, according to the New York Times report, an IBM team of more than 100 lawyers have been examining the deal, performing due diligence on such issues an antitrust concerns to existing Sun contracts with IBM competitors.
On Saturday, the Wall Street Journal reported that the talks were coming apart. The Journal reported that Sun executives were divided over the deal for reasons other than just the selling price. True or not, it couldn't have helped that IBM came in with an offer of either $9.10 or $9.40 per share (sources differ), down from the $9.55 that had been discussed. One reported reason for the reduced price was the size of the "change of control" payments that would be owed to Sun senior employees should the company change hands.
According to the Times, the Sun board didn't reject IBM's revised offer outright but asked for "certain guarantees" from the IBM side, such as restricting IBM's ability to abandon the deal. IBM balked at the requests, Sun declared its right to start negotiating with other buyers, and IBM withdrew the offer.
The turn of events was not good for Sun's stock price, which fell nearly 23 percent in premarket trading on Monday. The share price was US$8.49 at close of trading on Friday, fell to $6.68 in premarket trading on Monday, and stood at $6.47 at the time of this writing.
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