Subject Re: Some bucks left? Aquire developer products from Borland ...
Author paulruizendaal
> > What could possibly inspire them to make the announcement before
> > they had a buyer for the developer products?

This is my take on what is going on:

Late last Summer, Bob Coates approached the Borland Board with a $150
mln offer for the Development and Deploy divisions, which was turned
down in mid-September:

Consider the situation:
- Borland was valued by the market at about $450 mln
- They had $200 mln in cash, i.e. the market valued the operations at
$250 mln
- Bob's offer suggests a value of $100 mln for the ALM division
- Yet Borland paid $160 mln goodwill in 2003 alone for ALM
Bummer, this doesn't look good. What should the Borland Board do?

If they say the value of the ALM division is much higher, then the
legacy divisions are much less and they should consider the offer;
they have a fiduciary duty after all. If the value is about right or
too low, they have a problem with the ALM strategy that they approved
and might need to reconsider that.

Their official reply is the only possible one: they argue that all
divisions are integral to the strategy and that the Coates offer is
not sufficiently firm.

Coates takes the rejection to the street and starts working on a
firmed up offer (in a LBO-type financing deal, he will only have to
pony up some 50 mln of his own cash, which he could syndicate to two
or more partners, i.e. he needs 20 mln or less from his own fund).

The pressure is on: a new, firmer offer is likely to arrive and if
forced by shareholders to accept, the company is a $350 mln cash
purse with a $100 mln business: that is within reach for hundreds of
would-be raiders. And the share price is falling every day.

The Board has only one option: it must order an investment bank to
evaluate the integral strategy versus the ALM only strategy. The
investment bank will work with senior division management to assess
the (dis-)synergies and valuations. The management of the legacy
divisions no doubt realize that if the business is sold to a private
equity type investor, that they will get a stake in the pie and are
now in a spin-out frenzy. Just read their blogs.

Three months later, the investment bank undoubtedly concluded that
selling the legacy division and immediately re-investing in ALM
businesses maximizes the shareholder value (and their fees as well).
Selling to Coates would be the most obvious, but in order to get the
maximum out of him (and to satisfy fiduciary duties) the Borland
Board decides to 'test the market' as part of the divestment
decision. Hence the recent announcement.

"Borland have bought a new foot gun, but are all out of legs to
shoot", I read in a blog. The announcement has put a cloud over
Delphi 2006 and other products and it looks likely that sales will
plummet until clarity arrives. Not good for the seller, trying to
sell a business with rapidly declining sales...

Much depends on who the new owner will be and what the plans are. If
it is a financial buyer who just wants to ride out the revenue
stream, cutting cost as needed, there is a huge opportunity for
Firebird. If it is a buyer that wants to revive the product lines,
things will be more complex -- but an interesting business contact