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Thoma Bravo to take Compuware private in $2.5 billion deal

Published 09/02/2014, 02:14 PM
Updated 09/02/2014, 04:00 PM
Thoma Bravo to take Compuware private in $2.5 billion deal

By Arathy S Nair and Abhirup Roy

(Reuters) - Software maker Compuware Corp, under pressure from investors for more than a year over its poor performance, agreed to be taken private by investment firm Thoma Bravo LLC in a deal valued at about $2.5 billion.

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. 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 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 on Tuesday it would discontinue the payouts immediately due to the buyout offer.

Elliott Management, which owns about 9.5 percent of the company, said on Tuesday 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 Friday's close, Compuware shares have dropped 16.5 percent this year.

(Additional reporting by Liana Baker; Editing by Joyjeet Das and Saumyadeb Chakrabarty)

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