On Friday, IBM and Sun Microsystems were rumored close to an acquisition deal. By Sunday, talks between the technology rivals appeared stalled.
IBM reportedly offered about $7 billion, or $9.40 a share, to acquire Sun and all its intellectual property. But according to The Wall Street Journal, merger negotiations between Big Blue and Sun have significantly deteriorated.
Sun’s board rejected IBM’s formal acquisition offer Saturday and sent a notice terminating Sun’s agreement to negotiate exclusively with IBM, according to the Journal. IBM countered by withdrawing its offer to buy Sun. Some news reports suggest company advisers are still keeping lines of communication open.
The rejection was reminiscent of Yahoo’s rejection of Microsoft’s takeover offer last year. After much criticism and a market that pounded its stock, Yahoo reversed course, only to find Microsoft no longer interested in buying all of the company.
Strife in Sun’s Board
Sun’s board reportedly divided on the possibility of becoming an IBM brand. Scott McNealy, Sun’s chairman and cofounder, led a group of board members who opposed the offer while Sun CEO Jonathan Schwartz led a group that was in favor of the deal, according to the Journal.
IBM’s offer of about $9.40 a share is down from $10 reported earlier, but it still represents a near-100 percent premium on Sun’s value before the acquisition rumors began in March. So why did the deal deteriorate? Some speculate that it wasn’t merely about the financial aspects of the deal, but rather the terms of the negotiations.
According to news reports, Sun felt the proposed deal gave IBM too much room to walk away from the agreement. IBM disagreed, noting that the proposed language suggested it was committed to finalizing the acquisition. Sun saw the fallout on Wall Street on Monday with its stock down nearly 30 percent.
Who Would Buy Sun?
Analysts have pegged IBM…