Lotus Likes Sweeter Ibm Offer
Lotus Development Corp. is expected to accept a takeover bid by International Business Machines Corp. after IBM boosts its offer to as much as $70 a share, people close to the software company said.
IBM on Monday began a hostile $60-a-share bid for Lotus that would cost the world’s biggest computer maker $3.3 billion. IBM is expected to agree to pay more to make the takeover friendly and avoid a costly legal fight for Lotus, the No. 3 personal computer software company, analysts and investors said.
Lotus Chairman Jim Manzi’s responsibility to shareholders will compel him to agree to the offer, a company official said. IBM’s current offer represents an 85% premium over Lotus’ closing stock price of 32 1/2 last Friday, analysts said.
If Lotus officials try to resist IBM’s offer, shareholders probably would force the company to accept the bid by tendering their shares to IBM, analysts said.
“There is almost no chance whatsoever that Lotus remains independent,” said analyst Drew Brosseau of Cowen & Co. “There are enough major institutional holders in this stock that just got a big gift from IBM. They would not let Lotus turn it down.”
Legg Mason, which holds 900,000 Lotus shares, has said it would sell its stock to IBM unless a higher bid emerges. T. Rowe Price Associates, the sixth-largest Lotus shareholder with 1.97 million shares, indicated it will sell to IBM.
IBM Chairman Louis Gerstner and Lotus Chairman Jim Manzi have had discussions in New York City. Neither company would confirm the meetings. IBM officials couldn’t be reached for comment. Lotus officials had no comment.
Lotus has until June 19 to respond to the IBM’s offer. Lotus has said only that it is reviewing its options.
The company’s options are limited because no so-called “white knight” has stepped up to top IBM’s offer in a friendly acquisition.
IBM shocked the computer industry with its bid for Lotus. The offer came after five months of talks had produced no agreement with Lotus, the Armonk, N.Y.-based computer maker said.
It marks the first hostile takeover attempt in IBM’s 71-year history, a signal that Gerstner is focused on challenging Microsoft Corp.’s dominance of the personal computer software industry.
IBM wants Lotus’ Notes program, which allows computer users to share documents across a network. Notes is the leader in the burgeoning market for groupware software, although Microsoft expects to come out with a competing product later this year.
Lotus also makes several general desktop applications, such as spreadsheet and word processing software, that will give IBM more programs to run on its OS/2 operating system, which it needs to make it more competitive against Microsoft’s Windows.
Windows runs 80 percent of the world’s personal computers.
IBM is seeking to oust Lotus’s sixmember board of directors of Lotus and install its own three-member board. The proposed board action is in a proxy statement IBM wants Lotus shareholders to vote for.