Some Lotus Development Corp. shareholders are jumping at the chance to tender their stock to IBM Corp.
"It's a terrific offer to Lotus shareholders, and they ought to take it in a minute," said Todger Anderson, chief investment officer for Denver Investment Advisers, Denver, which plans to tender all of its 829,250 shares of Lotus stock.
Said Dan Smith, vice president and portfolio manager for Van Kampen American Capital Management Inc., Oakbrook Terrace, Ill.: "I'm happy with (the offer). It worked out for me."
Mr. Smith's company bought less than 100,000 shares of Lotus stock in May because executives saw the value of Lotus Notes, a software package that allows multiple users to work simultaneously on the same project.
IBM, Armonk, N.Y., made a $60-per-share, all-cash takeover bid for Cambridge, Mass.-based Lotus last week. The offer is worth $3.3 billion.
The deal would be the largest in the software industry. It also is the first time IBM has attempted a hostile takeover. IBM said it plans to use part of its $10 billion in cash reserves to finance the offer.
Not every institutional investor is prepared to tender. Some are waiting to see if IBM ups the ante, since Lotus' share price jumped $28.94 on Nasdaq - to $61.44 - on June 5, the day IBM announced its takeover bid.
Others are holding out in case a white knight steps up, although most shareholders of both Lotus and IBM see that as unlikely.
But Richard Barrington, director of client services for Manning & Napier Advisors, Rochester, N.Y., said the hostile bid did not artificially increase Lotus' value; it acted as a catalyst, increasing the stock to the appropriate level.
"Takeover or no takeover, this stock is worth at least $60, and it's not the takeover that creates value," said Mr. Barrington, who added his company so far is holding onto its 3.9 million Lotus shares.
"What Lotus has is something that just about everyone in the business should be concerned about or interested in. They have the defining communication product," he said, referring to Lotus Notes.
Jason Montgomery, manager of corporate affairs for the $47 billion Florida State Board of Administration, Tallahassee, said, "Most institutional shareholders would view that price as fair because it's an all-cash offer."
Mr. Montgomery, like several other shareholders of both IBM and Lotus, believes the deal would benefit both companies and their shareholders - Lotus immediately and IBM long term.
"I can't help but agree that the combination of IBM and Lotus could help broaden IBM's utility - in terms of value to personal computer users." Florida owns 197,000 shares of Lotus and 2.1 million shares of IBM stock, Mr. Montgomery said.
For now, though, Florida is holding onto its Lotus shares.
"So many times, people have been very innovative and have made master strokes of technological designs and have lost out because they have not been able to find a marketplace," said Francis Casale, new business developer with Axe-Houghton Associates Inc., Rye Brook, N.Y., According to CDA Investment Technologies Inc., Rockville, Md., Axe-Houghton owns 6,600 Lotus shares and 85,900 IBM shares.
Mr. Casale added that with IBM's marketing abilities, Lotus would be able to find the marketplaces it needed to sell Notes.
"You really need symbiosis in the future," Mr. Casale said. "You can't do it all by yourself anymore."
"IBM is looking at this as a launch point," said Edward Petner, president of Lynch & Mayer Inc., New York, which owns $100 million in IBM stock. "There's only a few players who could pay that price and have it make sense...... IBM can do that."
As for Lotus, Van Kampen's Mr. Smith said it's obvious IBM saw the value in Lotus Notes.
But despite the value that some see in its products, Lotus has not been doing well. In its first quarter of 1995, Lotus reported a net loss of $17.5 million, or 36 cents per share.
And several institutional investors don't think a white knight will come in and start a bidding war.
Mr. Petner said it was highly unlikely that AT&T Corp., one of the more popular rumored candidates, would step in, mostly because AT&T now is busy with other business deals. Furthermore, Lotus doesn't seem to have the same "fit" with AT&T as it does with IBM, Mr. Casale said.
"These companies need each other," Mr. Casale said.
Still, Denver Investment Advisers' Mr. Anderson said he isn't sure Lotus Notes on IBM's OS/2 operating system would be the best product.
"These software packages are very complicated and the training requirement is somewhat extensive," Mr. Anderson said. "There are other ways to communicate."
Another pitfall may be the cultural differences between the companies, Mr. Anderson said. An innovative company like Lotus working under the world's largest computer company may prove difficult; Lotus needs to keep its free rein, which is what helped it create products like Notes in the first place, Mr. Casale said.
"I think (IBM has) got to keep Lotus (employees) energetic, make Notes simpler to use, and to market the hell out of it," Mr. Anderson said.
IBM Chairman and CEO Louis V. Gerstner Jr., in a letter to Lotus President and CEO Jim Manzi, said he would keep Lotus "intact" and would make the company primarily responsible for key IBM software products.
"We respect the creative environment and entrepreneurial spirit you have fostered at Lotus," Mr. Gerstner said in his letter to Mr. Manzi. "We do not want to change that. We believe Lotus' employees are among the best in the industry at developing innovative and successful products."
Lynch & Mayer's Mr. Petner said IBM shareholders need to have a long-term outlook on the company and to have faith in IBM's management and its capabilities in corporate re-engineering.
IBM "management has been telling us that within one year they would begin a program of selling software services," Mr. Petner said. "This is certainly a big, bold step, but if you're a long-term investor, and you believe in this management, then this is a great move."