Target: Compuware Corp
Price: $2.5 billion
Sponsor: Thoma Bravo LLC
Financial Adviser: Goldman Sachs & Co
Compuware’s shareholders will receive $10.92 per share, comprising $10.25 in cash and 67 cents in shares of Covisint Corp, in which the company owns an 83 percent stake. The offer represents a 17 percent premium to Compuware’s closing on Aug. 29. Shares of Compuware rose as much as 12.8 percent to $10.55 after the deal was announced on Sept. 2. Shares of Covisint, which was spun out by Compuware last September, were down 8 percent.
“We think this is the best offer shareholders are going to get,” Susquehanna analyst Derrick Wood told sister news service Reuters.
Compuware’s software is used by companies such as Cisco Systems Inc, BT Group Plc and Domino’s Pizza Inc to manage complex applications. Its results have been hurt by weak IT spending and slowdown in orders, resulting in calls by shareholders to restructure its business or sell the company.
“When CPWR’s founder retired, activist funds started swarming because it was a company inefficiently run and made up of somewhat of a hodgepodge of assets,” Wood said.
Activist hedge fund Elliott Management first invested in the stock in December 2012 when shares were trading around $8 and made an offer of $11 per share, which was rejected by the company. Since then, Elliott and other investors have pushed Compuware to create value with an initial public offering of Covisint and divestment of assets.
“The management has spent a lot of time making it a less complicated business and that probably helped at the end of the day in coming up with a fair price for their assets,” Evercore Partners analyst Kirk Materne told Reuters.
The company also started quarterly cash dividends as part of its efforts to create value but said it would discontinue the payouts immediately due to the buyout offer. Elliott Management, which owns about 9.5 percent of the company, said it would vote in favor of the deal.
Jefferies, Credit Suisse and Deutsche Bank have agreed to provide debt financing for the deal. Goldman Sachs & Co was the financial adviser to Compuware.
Up to the Friday close before the deal’s announcement, Compuware shares had dropped 16.5 percent this year.
Arathy S Nair and Abhirup Roy are correspondents for Reuters in Bangalore. Additional reporting by Liana Baker.