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ComputerWire: IT Industry Intelligence

Network Associates Inc said yesterday it is prepared to raise the amount it is offering to buy the 25% of McAfee.com Corp it does not already own by 15.5% in order to get approval from a Special Committee of the anti-virus firm's board.

The company said it is prepared to offer 0.9 NAI shares, versus the previous offer of 0.78 shares, for each of the 12 million publicly held McAfee.com shares, representing a little over $137m based on yesterday's closing price.

But the increase in no way guarantees McAfee.com's committee will recommend the offer to its shareholders when it makes its first official statement on the matter today. The committee rejected a bid made in March as "financially inadequate", despite the fact that the offer was at a premium to McAfee.com's closing price the previous day.

This latest offer equates to about $11.47 per share, based on NAI's closing price yesterday, which is 53 cents higher than McAfee.com's closing price of $10.94. McAfee has traded as high as $40 this year, but has spent the last few months hovering around the $15 mark.

Earlier yesterday, NAI disclosed in a Securities and Exchange Commission filing that CEO George Samenuk emailed committee members over the weekend, saying he was prepared to offer 0.85 shares per McAfee.com share. But with the subsequent share fluctuations, that would have actually represented a discount on McAfee's market value.

Samenuk's offer to raise the offer price was based on the Special Committee "favorably" recommending shareholders accept the offer, and that McAfee.com does not execute a so-called "poison pill" or shareholder rights plan, which makes an unsolicited acquisition financially difficult to carry out.

Since NAI's third tender offer was announced at the start of the month, bad news out of NAI and good news out of McAfee has seen the deal look less and less attractive to McAfee.com shareholders. The offer of 0.78 NAI shares per outstanding McAfee.com share meant the offer was worth less than McAfee.com's actual share price.

Some think that McAfee.com's share price could be trading higher, were it not for the threat of NAI's bid being accepted, following its good earnings report last Wednesday. The company beat analysts estimates by three cents per share and CEO Srivats Sampath said he expects business to accelerate in 2003, the company tripling its subscriptions.

Conversely, NAI revised its full-year guidance downward, and said the third quarter will be roughly flat, disappointing investors. Late last week, NAI's stock was punished, dropping from about $18 to about $14 following its earnings announcement Thursday morning. McAfee.com shares were dragged down along with it.

The Special Committee comprises the two directors that do not have potential conflicts of interest or are otherwise tied to NAI - Frank Gill and Richard Schell - and will issue its decree on the tender offer today, in the form of a D9 SEC filing.

The committee has previously rejected one bid of 0.69 shares that they said undervalued the company, and accepted a second of 0.78 shares that was subsequently withdrawn when NAI discovered accounting irregularities in its own books.

© ComputerWire

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