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January 28, 2013

Compuware rejects $2.3bn buyout offer

Says it'll cut costs and boost shareholder value its own way

By Jason Stamper

Bob Paul
Compuware CEO Bob Paul.

Systems and performance management maven Compuware says the offer by Elliott Management Corp to buy the firm for $11 per share or $2.3bn is not nearly enough, and it’s sent the firm packing.

Compuware said its board, after analysis with its independent financial and legal advisors, completed its comprehensive review of the company’s alternatives and approved an action plan to "realise the inherent value of Compuware for its shareholders." Rejecting the takeover approach, Compuware did acknowledge that it needs to do more to get its share value up for shareholders.

"We are committed to creating value for shareholders and the actions announced today are focused on increasing profitability, building on the momentum of our transition to higher-growth businesses, and returning capital directly to shareholders," said Bob Paul, CEO. "Compuware has made significant progress positioning APM and Covisint for growth rates between 20% and 30%. We have also stabilized our Mainframe business and realigned our operating structure. Today’s actions, including the spin-off of Covisint, will sharpen our focus and reduce costs, delivering greater profitability and meaningful value for shareholders."

CBR exclusively revealed that Covisint would be spun off in an article back in May 2011.

"Our decision to initiate a dividend of $.50 per share is a clear signal that our businesses are strengthening and underscores our confidence in the value that will be created by our actions," Paul said.

Paul continued: "We believe that selling the company at $11.00 per share does not take into account our progress returning the business to profitable growth and our future prospects. We are confident our plan will accelerate our progress and provide significant, near-term returns as well as future upside to our shareholders. While we are focused on executing and delivering on our plan, the Board will carefully review and evaluate any credible offer it receives, including from Elliott, that delivers full value to its shareholders."

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As well as spinning off the remaining 80% of Covisint after 20% of it is floated, Compuware also said it will launch a 3-year cost reduction plan that it said will eliminate at least $60m in G&A and non-core operational expenses from the company, with a minimum of $20m realised in FY 2014.

It’s also kicking off an annual dividend of $.50 per share, at a yield greater than 4.5% based on Compuware’s current stock price, payable quarterly starting next quarter. "The dividend is a strong indication of the momentum of the company’s strategy, the strength of its balance sheet, and the Board’s ongoing commitment to disciplined capital allocation as an important means of delivering value to shareholders," the firm said.

Compuware’s stock had risen to a 52-week high of $11.72 by the time of writing.

"We believe the execution of this plan will drive the growth of our key businesses, improve our margins and unlock the substantial value inherent in our company," said Paul.

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