Total Pageviews

Monday, December 17, 2012

Elliott Bids $2.3 Billion for Compuware

Elliott Management has pulled out a trusted strategy from its technology investment playbook.

On Monday, the hedge fund offered to buy Compuware, a business software maker, for about $2.3 billion, repeating a tactic that prompted the sale of Novell in late 2010.

Under the terms of its bid, Elliott would pay $11 a share, which is 25 percent higher from when the hedge fund first disclosed its stake in Compuware last month. The $20 billion hedge fund owns about 8 percent of the company's shares.

Compuware said in a statement that it was reviewing the takeover proposal.

Jesse Cohn, one of Elliott's portfolio managers, has agitated for change at a number of technology companies - and done well. The firm bid about $2 billion for Novell, which later put itself up for auction and eventually sold i tself to the Attachmate Corporation for about $2.2 billion.

The hedge fund also pressed BMC Software to explore a sale, which the software maker acceded to in October. Elliott also pushed for a number of changes at Iron Mountain last year, including the replacement of the information management company's chief executive.

In a letter to Compuware's board on Monday, Mr. Cohn wrote that the bid was motivated by what he sees as the company's underperformance. Compuware, he wrote, trailed the Nasdaq stock index by an average of 6 percent over the last year; it lagged the Standard & Poor's 500-stock index by 34 percent over the last two years.

“Compuware is a long-established company that we have followed closely for several years,” he wrote. “We believe in the quality of Compuware's assets â€" however, its execution, profitability and growth have meaningfully underperformed.”

People close to Elliott said that several private equity firms have expre ssed interest in buying the company for some time.

Other activist investors, including Carl C. Icahn, have bid for a company in the hopes of flushing out others willing to pay more.

But the people close to Elliott said that the hedge fund has the resources to pay up for Compuware. That said, Mr. Cohn wrote in his letter that his firm's bid is subject to due diligence and the availability of financing. Elliott has had conversations with potential lenders.

So far, the activist hedge fund has stirred up interest among its fellow investors: Shares in Compuware were up more than 13 percent by midday trading on Monday, to $10.80. Still, they remain below Elliott's offer, suggesting that some shareholders may be skeptical about the arrival of a higher bid.

The bid follows number of cha nges at Compuware. Almost two months, the company announced that its executive chairman and co-founder, Peter Karmanos, would retire in March. And last Friday, Compuware said that its Covisint subsidiary, which makes business communication software, was preparing to go public.