Compuware Corp. (
is finally selling itself to private-equity firm Thoma Bravo for
approximately $2.5 billion. Under the agreement, shareholders will
receive $10.92 per share, which is a premium of approximately 17%
from Compuware's closing stock price of $9.35 on Aug 29. Shares
surged 13.3% to close at $10.59 on Sep 2.
Compuware provides software solutions and services that help in
managing distributed web-based applications and mainframe systems.
The company reported revenues of $720.8 million in fiscal 2014,
which was almost flat with fiscal 2013.
Although the current deal is subject to customary shareholder and
regulatory approvals, it has already received support from one of
the major shareholders Elliott Management Corp. Thoma Bravo and
Eliott Management have entered into an agreement regarding the
deal, which removes a major obstacle for the completion of the
Elliott Management holds almost 9.5% of Compuware shares and has
been a long-time supporter of a buyout. The hedge-fund kept
management under significant pressure since its $11.00 per share
offer was rejected in Jan 2013. At that time, Compuware turned down
Eliott Management's total deal offer of $2.3 billion on the grounds
Post Elliott, Compuware had reportedly solicited a number of other
private equity funds such as Blackstone Group LP, TPG Capital LP
and Golden Gate Capital for a possible buyout. However, weakening
order growth on the backdrop of slowing IT spending did not
attracted the private-equity players.
Bowing to pressure from institutional investors, Compuware
announced a restructuring program that included dividend payment,
spin-off of Covisint, divestiture of non-core assets and cost
control initiatives. In Jun 2013, Compuware paid its first dividend
of 12.5 cents. The company completed the spin-off of Covisint Corp.
) in Sep 2013.
The restructuring program is expected to save approximately $60.0
million over the next three years. For fiscal 2014, the plan is
expected to save at least $20 million.
In fourth-quarter 2014, Compuware successfully completed the
divestiture of its Changepoint, Professional Services and Uniface
business segments to Marlin Equity Partners. The company also
started exploring the feasibility of separating its APM and
Mainframe operations as independent entities.
Although Compuware has an innovative product pipeline and its
restructuring program is expected to boost profitability, the
results are expected to remain subdued due to sluggish IT spending
environment. Moreover, intensifying competition from the likes of
) and Computer Sciences Corp. (
) may hinder further growth.
In this scenario, we believe that Thoma Bravo's buy-out offer is
significantly beneficial for shareholders. The deal is expected to
close in early 2015.
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