McAfee.com Corp. shareholders heeded management's recommendation and overwhelmingly rejected security software developer Network Associates Inc.'s tender offer to exchange .90 of an NAI share for each outstanding share of McAfee.com, it was announced Wednesday. Undaunted, NAI extended until mid-August the time frame for McAfee.com shareholders to take advantage of the offer, through which NAI hopes to purchase the 25 percent of McAfee.com it doesn't already own.
The offer had been set to expire at midnight Tuesday. Only 4 percent of eligible McAfee.com's shares were tendered into the offer, according to the companies. For the deal to go through, NAI must either receive a majority of votes or increase its McAfee.com stake from 75 percent to 90 percent. Those shares tendered are enough to increase NAI's stake in McAfee.com to only 76 percent, NAI said.
McAfee.com's directors urged shareholders earlier this month to reject NAI's offer, saying that at the price offered McAfee.com would be significantly undervalued and better off operating independently. Following Tuesday's voting results, McAfee.com Chief Executive Officer Srivats Sampath called for NAI to either increase its offer or withdraw the bid so that both companies can move forward. NAI has increased its bid for McAfee.com several times, most recently after it revealed that accounting irregularities would require the company to restate its financial reports for 1998 through 2000. NAI's (NET) share price has dwindled throughout July, dropping steadily from a close of US$19.27 on the last trading day in June to Tuesday's $12.18 close, while shares of McAfee.com (MCAF) have stayed steadier. McAfee.com ended Tuesday trading at $13.79, down only slightly from its June close at $14.64.
McAfee.com, in Sunnyvale, California, originated as a part of NAI, based in Santa Clara, California, and was spun out as a separate company in 1999. NAI hopes to reabsorb the subscription services and hosted applications provider to strengthen its own offerings for the consumer and small-to-medium business market, and to cut down on customer confusion about the distinction between McAfee.com and NAI's McAfee Security product group.
NAI's offer remains at .90 of an NAI share per McAfee.com share, and is being extended until midnight Eastern Time on Aug. 13.
NAI share price dropped 3.5 percent in early trading Wednesday on the New York Stock Exchange, to $11.75, while McAfee.com shares declined 4.4 percent, to $13.18, in trading on the Nasdaq exchange.