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Tornado100 winner SuSE Linux acquired for $210 million

4 November 2003 17:05
By Tornado Staff

The acquisition of enterprise Linux pioneer and 2-time Tornado100 winner SuSE Linux of Germany looks to be the biggest exit of a private European tech company this year, and should provide lucrative returns to investors e-Millenium 1, AdAstra and APAX Partners.

US-based software firm Novell announced that it has acquired SuSE Linux for $210 million (183 million euros) in cash in a deal that will make Novell/SUSE LINUX the world's largest supplier of desktop-to-server Linux solutions and technical support.

Although shareholdings were not released with the announcement, and a spokesperson at investor AdAstra offered no comment ahead of today’s press conference by Novell, the deal should provide a healthy return for the venture capital teams who continued to support SuSE during the market fallout with Linux. SuSE Linux received a first round funding of 10 million euros in November 1999 from Apax Partners and Intel, followed by an undisclosed sum in March 2001 by Capital Research, Compaq and SGI. After SuSE Linux was selected to the Tornado100 in May of 2001, a third round of 15 million euros followed in October from Apax, Intel Capital and e-Millenium 1 – a VC fund with a corporate investors' network that includes Accenture Technology Ventures, Beisheim Holding, Deutsche Bank, La Caixa and SAP.

AdAstra provided a fourth round of 4.4 million euros in February 2002, at a time when the Linux sector was experiencing its most negative sentiment. Nevertheless, in May, SuSE received its second consecutive Tornado100 award, along with the following comments from Tornado’s selection committee:

“After undergoing a difficult restructuring period, SuSE appears to have turned its fortunes around, with sales now pointing north and profitability in sight…SuSE looks to be one of the few Linux players left standing.” (Tornado Insider Summer issue 2002)

As for Novell, it becomes the only $1 billion software company with a Linux distribution and the worldwide technical staff to support it.

"The acquisition of SuSE Linux will complete Novell's ability to offer enterprise-class Linux solutions to our customers from the desktop to the server,” said Jack Messman, chairman and CEO of Novell. “No other enterprise Linux vendor has the operating system experience and the worldwide technical support capabilities that Novell will be able to deliver. Novell is bringing our significant resources to bear to help customers adopt Linux with more confidence, giving them the freedom of choice Linux provides without the anxiety over whether an open source solution can truly be relied on for mission-critical functions."

"Novell understands the power of open, standards-based computing, and has been moving in that direction for some time," added Richard Seibt, CEO of SuSE Linux. "Novell's global reach, marketing expertise and reputation for security, reliability and global enterprise-level support are exactly what we've been seeking to take SuSE Linux to the next level. We've also been impressed by the incredible loyalty and competence of Novell customers and business partners, and we're looking forward to joining forces to help customers gain the benefits of Linux and to help Novell continue to expand its role in the open source community."

Novell also announced that IBM intends to make a $50 million investment in Novell convertible preferred stock. In addition, Novell and IBM are negotiating extensions to the current commercial agreements between IBM and SuSE Linux for the continued support of SuSE Linux on IBM's eServer products and middleware products to provide for product and marketing support arrangements related to SuSE Linux.

Citigroup Global Markets acted as Novell's financial adviser to the transaction. Clifford Chance Punder served as Novell's legal counsel. Arma Partners acted as financial adviser to SuSE Linux and its stockholders. Freshfields Bruckhaus Deringer served as legal counsel to SuSE Linux and its stockholders.

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