Packeteer, Inc. (NDAQ: PKTR) shareholders aren't quite ready to pack their bags as the stock soared past a $5.50/share buyout offer. The networking software company rejected the $5.50/share offer from Elliott Associates and installed a poison pill in the form of a shareholder rights plan. The move comes after Elliott took its bid hostile by making a tender offer directly to shareholders in an attempt to gain majority control.
The Packeteer board wasn't about to give up that easily. The company adopted a shareholder rights plan with a one year duration whereby any person or group that acquires 15% or more of Packeteer common stock without prior board approval would face a triggering event that would cause significant dilution in their voting power via a rights offering to shareholders. This would make it prohibitively expensive to takeover without approval.
The Packeteer board also confirmed that it was exploring strategic alternatives to maximize value for shareholders, which could include a business combination with third parties or with Elliott, remaining independent, or other strategic or financial alternatives that could deliver higher shareholder value than the current Elliott tender offer. This statement is what caused the run-up in shares seen on Wednesday.
Packeteer also noted in its
Schedule 14D-9 filing that it has received indications of interest from, and conducted discussions with, at least five other potential strategic acquirors. One of these companies even submitted a non-binding proposal for an all cash acquisition with a valuation higher than both the Elliott offer and other offers on the table. Furthermore, at least three others also submitted non-binding documents outlining possible transactions.
Even if a sale transaction doesn't take place, the board believes that the company's stand-alone operations will produce significantly greater value for shareholders than Elliott's offer. After all, these strategic and financial buyers are interested in the company because of its products, technologies, and ability to generate revenues and earnings. Traditionally, the company has not made estimates, but it released some bullish ones in its proxy.
Packeteer said in its proxy filing that it anticipates earnings per share to be $0.39 in fiscal 2008. The price-earnings multiple on the March 4th share price (the day prior to the takeover proposal) was 20.3x. Given that this was based on the publicly available estimate of $0.19, the new $0.39 number yields a theoretical value of $7.93 per share. Clearly, the expected benefit of the company's 2008 operating plan has not been fully realized in the offer or current stock price.
In the end, Wednesday was a great day for Packeteer shareholders. The company guided earnings much higher than anyone expected while it also revealed that up to six parties were interested in launching a takeover bid for the company. One offer is already on the table while at least one offer is already substantially higher and in the advanced stages of negotiation. Combined, these factors make PKTR a stock worth watching!
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