Serena is the latest in a spate of technology companies to be taken private, including Sungard Data Systems, WRQ, Attachmate, and, reportedly, CSC, to name a few.
Under the terms of the agreement, Serena stockholders will receive $24.00 in cash in exchange for each of their shares. The deal is expected to close in the first quarter of next year.
Today’s announcement is great news for Serena and its shareholders, said Serena’s president and CEO Mark Woodward. Our decision to partner with Silver Lake to take the company private represents the culmination of a thorough review of our standalone plan and strategic alternatives and we believe this is the best value proposition for our shareholders.
On a conference call to discuss the news, Serena’s CFO Bob Pender explained the decision to be taken private. We had some challenges growing license revenue in Q1 and Q2, so at that time management and the board decided to seek strategic alternatives to maximize the value of the company for its shareholders, he said.
Serena has itself made a number of acquisitions over the years, the most notable being the $380m acquisition of Merant in March 2004. It followed that deal in June 2004 with the acquisition of a Requirements and Traceability Management product from Integrated Chipware.
In September this year, Serena’s Woodward told Computer Business Review that it would probably make at least two more acquisitions this year. We have a couple in the pipeline, likely to happen this year, he said. We’re probably looking at $20m to $30m acquisitions, what you might call ‘tuck-in’ acquisitions. The company has not said whether these buys will now be on hold until after the acquisition of Serena itself closes, if they happen at all.
Meanwhile, the company’s Pender admitted that Serena still faces near-term challenges, and said these challenges are significant and material. The potential effect could drive the company’s stock price significantly lower than this $24 cash offer, he said.
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Asked why a company like Silver Lake Partners would want to pay cash for a company with such near-term challenges, Pender said the company is looking to overcome those challenges. Over time we believe we can significantly increase the value of the company, in a private context, he said. Going private provides us with the ability to increase the flexibility associated with driving our long-term growth prospects.
David Roux, a co-founder and managing member of Silver Lake Partners, said, Serena is a great company. We have complete confidence in Mark Woodward and the rest of the Serena management team and look forward to working with them to enhance and extend their successful track record as the leader in Change Governance, providing comprehensive solutions to customers across the corporate and public sector spectrum. We believe our interests are aligned with the long-term interests of Serena’s customers and employees.
Serena has also announced preliminary third-quarter results. The company expects license revenue to be in the range of $21.5m to $22.5m, and total revenue in the range of $64m to $65m. In the same quarter a year ago, license sales came to $22.1m, and total sales came to $56.6m.
Competitors in the change management software market include MKS, Mercury Interactive, IBM Rational, Telelogic, Borland, and Compuware.
