(Corrects paragraph 6 to Tom Gores instead of Tom and Alec Gores)
* Novell's board may be considering alternatives-source
* Alternatives may include remaining independent-source
* IPO or partial sale may also be considered-source
By Nadia Damouni
NEW YORK, Sept 22 The auction of Novell's NOVL.O NetWare and identity management products is dragging as rivals appear more willing to pay up for the software maker's crown-jewel Linux operating system unit, sources familiar with the matter said on Wednesday.
Novell's board, which hired JPMorgan in March to look at strategic options for the whole company, is unwilling to part with its best performing unit SUSE Linux alone and be left with a shell of legacy assets, according to three sources, who requested anonymity because they were not authorized to speak on the record about the auction.
However, private equity firms, the natural buyers for its NetWare and identity management units, are so far unwilling to pay the price the software company wants, the sources said.
That has slowed a now-six month process, which has gone through multiple rounds of bids. Two of the sources said it was unclear when final bids would be submitted.
One source described the sale of Novell's older Lan network assets as a "difficult" and "onerous" process in which information between the parties has been hard to obtain.
Los Angeles-based Platinum Equity, founded by Tom Gores, had been among the private equity firms participating in the auction, but it has dropped out, another source said.
Several months ago Platinum submitted a preliminary expression of interest but it did not meet management expectations, that source said.
The source, who was not authorized to speak on the record about Platinum, said the offer had been for a group of assets that included the NetWare business.
Candidates to buy the assets include Platinum's buyout partner Gores Group, and Seattle-based Attachmate, which is owned by an investment group led by Francisco Partners, Golden Gate Capital, and Thoma Cressey Bravo, two of the sources said.
Gores Group did not return calls for comment, and Attachmate declined to comment. There was no statement from Platinum.
Vector Capital, Vista Equity Partners and Symphony Technology Group also may be potential suitors for the NetWare assets, another source familiar with the matter said.
One of the sources said that there has been ample interest in the SUSE Linux business from other possible suitors including VMware (VMW.N) and CA Inc (CA.O), and it could fetch a rich multiple. But, the source questioned whether it would be enough to justify the lower value for the remainder of the company.
"Look at the numbers: the Linux business is what everyone wants. Once you strip that out the rest is just a dying cow," the source said.
One of the other sources said a combined offer could reach $6.25 per share, marginally higher than the original offer from Elliott Associates in March of $5.75 per share.
The $2 billion bid originally offered by its largest shareholder was rebuffed by Novell, leading the company to initiate a formal process.
One of the sources said the board could now be considering options to create value, which include remaining independent, exploring an IPO of a division, or a partial sale to redeem the upside. A Novell spokesperson declined to comment.
Novell's shares closed up 2.6 percent at $6.51.