Silver Lake in advanced talks to sell Serena Software

• Deal could fetch $450-500 mln

• Silver Lake bought company for $1.2 bln in 2006

• HGGC has 30 days to negotiate deal

Silver Lake, which acquired Serena in 2006 for $1.2 billion, is now negotiating a deal with HGGC that could value it at between $450 million and $500 million, the people said, cautioning that a final agreement had not yet been reached.

Under an exclusivity agreement signed this week, HGGC has 30 days to negotiate with Silver Lake and clinch a deal, one of the people added.

The people spoke on condition of anonymity because the sale process is confidential. Silver Lake and HGGC declined to comment, and Serena Software representatives did not immediately respond to a request for comment.

San Mateo, California-based Serena provides software to companies seeking to streamline their management processes. Some of its products compete with CA Inc, IBM Corp and Compuware Corp.

Serena has laid off staff and cut costs in the last two years to address falling profits and boost operating margins as its software license revenues continued to decline.

The company reported total revenue of $135 million for the nine months ending Oct. 31, down from $153.6 million a year ago, according to its latest financial statement. The company had $410 million in debt and $94.4 million in cash, the statement said.

Silver Lake committed $335.5 million in equity in the $1.2 billion deal to take Serena private in 2006. It has not taken any cash dividends from the company since, according to regulatory filings.

Silver Lake currently owns about two-thirds of Serena, with the remainder owned primarily by Douglas Troxel, who founded Serena in 1980 and who was its chief executive officer until 1997. He still sits on Serena’s board of directors.

Formerly known as Huntsman Gay Global Capital, Palo Alto, California-based HGGC is a middle-market private equity firm with $1.1 billion in committed capital under management, according to its website.

Last year, HGGC sold commerce technology provider hybris Software to SAP AG. Other HGGC software deals include Sunquest Information Systems Inc and Innovative Interfaces Inc.

Nicola Leske, Nadia Damouni and Greg Roumeliotis are reporters for Reuters News in New York