Private equity firm Elliott Associates LP yesterday made a $2-billion unsolicited takeover bid for business software company Novell Inc by offering to buy the 91.5 per cent of the shares it does not already own for $5.75 each.

New York based Elliott Associates manages more than $16 billion of capital for large institutional investors and wealthy individuals, and already holds 8.5 per cent stake in Waltham, Massachusetts-based Novell and has offered to acquire the remaining 91.5 per cent at a premium of 21 per cent over Novell's Tuesday closing price.

The offer sent Novell's share price up by more than 26 per cent after hours trading yesterday from $4.80 to $6.15, above Elliott's offer of $5.75, suggesting that shareholders anticipate a higher rival bid since Novell holds about $1 billion in cash in its books.

In 2008, Elliott had made an unsuccessful bid for Epicor Software Corp and its unsolicited takeover bid for Novell could wake up bigger players like Hewlett-Packard Co, Cisco Systems Inc. or Microsoft say analysts, but added that Microsoft's bid could attract severe scrutiny from regulators.

Microsoft's Windows operating system runs on about 90 per cent of personal computers globally and is a strong player in the server market. It has an existing partnership with Novell for Novell's version of Linux. The partnership announced in 2006, had drawn severe criticism from the free and open source software organization FOSS.

Novell, which specialises in enterprise operating systems, such as SUSE Linux Enterprise and Novell NetWare, is the world's second-largest seller of Linux software.

In December 2009, Novell reorganised its product development business units into two business units, Security, Management, and Operating Platforms; and Collaboration Solutions.

In 2008, Novell had revenues of $956.5 million and has a market capitalisation of around $1.66 billion and as of 31 January 2010, the company had cash, cash equivalents and short-term investments of $991 million.

Novell yesterday confirmed that it has received an unsolicited, conditional proposal from Elliott and said that its board of directors will review Elliott's proposal in consultation with its financial and legal advisors.