Lotus Shares Continue to Rise on Hopes IBM Will Up Its Bid : Takeovers: Some believe a sweetened offer could prompt the software maker to drop its opposition.
Lotus Development Corp.’s stock continued to rise Thursday as investors wagered that IBM Corp. will sweeten its $3.3-billion hostile bid for the software company.
Lotus shares were up $1.125 to $63.50 on Thursday, well above the $60-per-share price that IBM offered in its surprise bid Monday. But despite Lotus’ efforts to recruit another bidder that might enable the firm to remain at least quasi-independent, Wall Street traders said there appears to be no competing offer on the horizon.
Rather, investors are acting in the belief that IBM will agree to increase its offer in exchange for Lotus’ dropping its opposition to the deal. Lotus Chairman and Chief Executive James P. Manzi and Lotus director Richard S. Braddock, a partner with the leveraged buyout firm of Clayton, Dubiller & Rice, are in New York consulting with the company’s financial advisers on its options--and most believe it now has few.
Lotus’ board has 10 days from the time the offer was made in which to respond; the 8:30 a.m. Monday announcement makes that deadline next Thursday morning. Lotus shares closed at $32.50 last Friday, before IBM made its bid. IBM’s stock dropped 50 cents Thursday to $89.37. Manzi and IBM Chairman Louis V. Gerstner reportedly met face-to-face Wednesday in New York, though both companies declined to comment on whether a meeting had taken place. However, a Lotus insider said recent reports that Manzi is despondent over the possible loss of control are “hyperbole.”
Lotus’ strong-willed chief executive is seen as the major stumbling block to a friendly deal between the two companies.
“There would clearly be a vacancy in the corner office on the seventh floor at Lotus,” said Jeffrey Tarter, editor of Softletter, an industry newsletter. Few believe that Manzi would stay to run an IBM-owned Lotus, despite Gerstner’s assurances that the company would remain independent.
Analysts are predicting that IBM will increase its offer to anywhere from $66 to $70 per share, raising the total price of the purchase to between $3.63 billion and $3.85 billion.
