Several new private equity funds, such as Apax Partners LLP and Hellman & Friedman LLC, have emerged as prospective buyers for Compuware Corp. , reported Bloomberg. Earlier, Compuware contacted Blackstone Group LP, TPG Capital LP and Golden Gate Capital regarding the proposed sale.
It is noteworthy that Compuware had rejected a $2.3 billion bid from activist investor Elliott Management Corp. in Jan, 2013, citing the $11.00 per share offer by Elliot inadequate.
In late January, the company also initiated certain steps to increase shareholders’ value and profitability by stringent cost controlling measures. Compuware announced a 3-year restructuring plan that will save $60.0 million. For fiscal 2014, the plan is expected to save a minimum of $20 million.
Compuware will pay a dividend of 50 cents per share beginning in the first quarter of fiscal 2014. 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 but also indicated chances of further restructuring in the form of headcount reductions and divestitures.
Although a better buyout offer will be positive for investors, we believe that the prevailing sluggish macroeconomic conditions will likely to act as an impediment toward fetching a higher price.
We believe that Compuware’s recently announced initiatives are positive for shareholders over the long term. The company’s product portfolio, which comprises mainframe software, project-management tools collaboration technology and performance-management services for cloud computing and mobile applications are expected to be the growth potentials.
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 (CA) and International Business Machines (IBM - Analyst Report) going forward.
Currently, Compuware has a Zacks Rank #2 (Buy).