Compuware Corp. (
is reportedly up for sale. According to a recent news feed from
Reuters, Compuware management has recently met private equity
firms such as Blackstone Group LP, TPG Capital LP and Golden Gate
Capital regarding a potential deal.
The move comes as a surprise as the Detroit-based company
rejected a $3.2 billion bid from activist investor Elliott
Management Corp recently in Jan, 2013. Compuware cited the $11.00
per share offer as inadequate and announced a number of
initiatives that included a dividend payment for the first time
in its history.
Compuware will pay a dividend of 50 cents per share beginning
first quarter of fiscal 2014. The company announced a 3-year
restructuring plan that will save $60.0 million annually. For
fiscal 2014, the plan is expected to save a minimum of $20
Additionally, Compuware announced plans to distribute its
remaining shares in Covisint Corp directly to shareholders after
completing the Initial Public Offering ("IPO") of the 20% Class A
stock. The initiatives not only reflected Compuware's strong
balance sheet ($64.4 million in cash & cash equivalents) but
also indicated chances of further restructuring in the form of
headcount reductions and divestitures.
In such a scenario, the private buyout rumors not only create
uncertainty for investors but also affect the credibility of
Compuware's initiatives. Although a better buyout offer will be
positive for investors, we believe that current sluggish
macro-economic conditions are likely to act as an impediment
towards fetching a higher price.
We believe that Compuware's recently announced initiatives are
positive for shareholders over the long term. The company is
optimistic regarding its cloud computing and mobile growth
strategies. Moreover, its recent better-than-expected third
quarter results reflect continued demand in the APM and Covisint
business, which will boost further growth going forward.
We believe that new program wins and introduction of new
products will help Compuware to counter strong competition from
the likes of
BMC Software Inc. (
CA Technologies (
International Business Machines (
Currently, Compuware has a Zacks Rank #2 (Buy).
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