At the behest of its activist shareholders, including Starboard Value, Compuware (CPWR +1.1%) names Augusta Columbia Capital partner Jeffrey Clarke and Hunter College president Jennifer Raab to its board, replacing Glenda Price and Ralph Szygenda.
The company plans to announce its full new board slate by the annual shareholder meeting in Jan. It replaced its chairman and 2 other board members in April.
Compuware (CPWR -0.8%) extends the deadline for submitting nominees for election to its Board to Jan. 10 and has "been engaging in a dialogue with our major shareholders about enhancing our Board."
The move comes after Starboard issued a letter yesterday criticizing the company's operational execution and pushing for share buybacks, dividend hikes, asset sales, and changes to the Board. CEO Bob Paul responded, "The significant and measurable steps already taken and being implemented by Compuware to create shareholder value, and our constructive dialogue with our shareholders, speak for themselves."
Activist fund Starboard, a ~5% shareholder in Compuware (CPWR +2.7%), has written a letter to the company's board prodding it to consider strategic alternatives. Starboard believes Compuware is "extremely undervalued relative to the quality of its businesses and the potential cash flow that the Company could generate after restructuring its expenses."
The fund outlines a number of proposals that would reward long-term shareholders, including a $450M share repurchase program (which would decrease shares outstanding by ~19%), divestment of non-core assets like Changepoint and Uniface to fund further buybacks, a distribution of Compuware's 80% stake in Covisint (COVS), and a dividend hike to $0.60/share.
On the operating side, Starboard calls Compuware's margins "unacceptable," noting that bloated G&A expenses (16% of sales) have resulted in EBITDA margins that "are significantly lower than its peers." Starboard believes Compuware could reach EBITDA margins of 35% by adding $50M-$70M in cost reductions on top of its current $80M-$100M target.
Finally, Starboard questions Compuware's board composition and its ability to execute a successful restructuring, writing, "only one of the Board's eleven members was an independent director with relevant software industry experience ... the average tenure of the other Board members is over 10 years."
Compuware has stated recently that it is attempting to shop itself, but rejected an $11/share offer from activist investor Elliott Management back in January.
After pricing its 6.4M-share IPO at $10, Covisint (COVS) opened at $12.77 and is currently at $12.92, up 29.2%. That's good for a market cap of $470.3M, or 5.2x FY13 (ended March '13) sales.
Compuware (CPWR -0.4%), which owns 82% of the cloud engagement/collaboration platform provider post-IPO, is off slightly. Compuware has said it plans to fully distribute its Covisint stake to shareholders within 12 months of the IPO.
Compuware (CPWR +2.4%) spiked higher just before the close after Reuters reported sources have told it the software/IT services firm "has renewed efforts to sell itself."
Compuware has reportedly courted CA, the P-E consortium acquiring BMC Software, and other P-E firms who might look to make a joint bid with a software vendor. The company is looking for offers to be made this month.
There are no details on CA's interest (or lack thereof) in making a bid.