SCO gets $100m private equity bailout offer

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Merely weeks after warning its shareholders that it's Unix litigation against Novell and other vendors may leave them with nothing, SCO late yesterday revealed it had received a potential $100-million (£50.8-million), private equity bailout offer.

Five months after filing for Chapter 11 bankruptcy protection as part of a reorganisation effort last September, the SCO Group said in a statement that the offer would take the company private.

The vendor announced that the cash injection would come from Stephen Norris & Company Capital Partners (SNCP) and partners in the Middle East, who "have agreed to provide up to $100 million to finance a plan of reorganisation for the Group," it stated.

SNCP would also gain a controlling interest in the company, where SCO chief Darl McBride would resign immediately. But the deal is subject to approval by the US Bankruptcy Court judge in Delaware currently chairing its bankruptcy hearing.

The court filings on the offer also make the continued pursuit of the ongoing legal battle SCO initiated against Novel, IBM and others four years ago a condition of the offer.

SCO originally accused the vendors of infringing on Unix copyrights it claimed to own, but suffered a major setback last summer when the judge presiding over the copyright case ruled that SCO did not own the rights to the disputed software.

The proposed SNCP deal would offer SCO the cash infusion to allow SCO "to emerge from Chapter 11 of the US Bankruptcy Code in the coming year," according to the announcement.

SCO has endorsed the deal, stating: "The board of directors of SCO has unanimously determined that this financing and plan of reorganisation is in the best long-term interest of SCO and its subsidiaries, as well as its customers, shareholders, creditors and employees."

But the success of the offer is not guaranteed and it isn't the first financial proposal made for SCO since it filed for bankruptcy last year. Last October, its announced the "potential" sale of its Unix business for $36 million (£18.3 million) to JGD Management, a subsidiary of New York-based investment firm, York Capital Management LLC, which did not come to fruition.

Pamela Jones, editor of legal blog Groklaw, which has been following the SCO litigation drew attention to a key passage in the SNCP offer documents that read: "SNCP has developed a business plan for SCO that includes unveiling new product lines aimed at global customers. This reorganisation plan will also enable the company to see SCO's legal claims through to their full conclusion."

"That's code, I think, for 'this will enable the company to continue to attack Linux,'" she said.

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