Update: Compuware Buyout

Sep. 4.14 | About: Compuware Corporation (CPWR)


Shares are up 15% this week on the news that a private equity firm is taking the private.

We think a higher bid could come in but might take time.

The buyout offer wasn’t a surprise but the amount was less than expected.

Compuware (NASDAQ:CPWR) has an offer to be bought by PE firm Thoma Bravo for some $2.5 billion. That works out to right at $10.92 per share. Shares spiked on the news, now trading at a 2.5% to 3% discount to the offer price.

We first covered Compuware back in November, noting that the company was poised for a buyout. Since then shares are flat. At the time we felt the company could fetch $12 to $13 a share in a buyout. As we noted, the Elliott Management hedge fund offered to take Compuware private for $11/share just a couple years ago. Elliott still owns between 8% and 9% of the company. We're not so sure that Elliott will go away easily.

Activist Starboard Value also owns right at 5% of the company. The fund got involved last year noting that the stock was grossly undervalued and had numerous ways to unlock shareholder value. Shares are flat since Starboard got involved. We think that hedge funds and shareholder might hold off for a higher bid. This includes a potential bid from Bain Capital and Golden Gate Capital -- which bought Compuware's larger rival BMC last year. Bain and Golden Gate had already had conversations about merging BMC and Compuware and had identified multi-million dollars in potential savings.

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