Last Friday hedge fund Sandell Asset Management, which owns 6% of Sybase, said the Dublin, California-based firm should consider a share buyback, an IPO and spin-off of its flourishing mobile business or a sale of all or part of the company.
Sandell outlined the recommendations in an open letter to Sybase CEO John Chen last week. The company believes that Sybase can improve its stock to over $39 per share, an all time-high, if it heeds its advice.
The board has a fiduciary duty to consider all options to maximize the value of these assets, said Sandell Asset CEO Thomas Sandell said in a statement. We challenge [Sybase’s] management and the board to present a plan to enhance value with low levels of risk.
On Monday Sybase announced that it would review Sandell’s recommendations without special consideration but in the context of the regular reviews it conducts of its business.
Chen responded with a statement: Our Board of Directors regularly reviews the subjects in your letter, including use of cash, configuration of the business, and other strategic opportunities to drive shareholder value.
Chen said the company welcomes the views of its shareholders.
That announcement sent Sybase shares up 6.8% on the NYSE at Monday’s close to $26.12. The stock settled down during the week and was changing hands at $25.51 in the mid-afternoon trade yesterday.
Overall Shares of Sybase are flat this year – down around 1% to date. But some Wall Street analysts believe the price is fair game and that Sybase customers might resist the possibility of a sale. We haven’t heard customers saying they want Sybase to be sold, said Trip Chowdhry, an analyst at Global Equities Research.
Sybase will announce its third-quarter earnings next Thursday.
Our View
It’s no coincidence that Sandell’s recommendations to seek a buyer cam on the same day that Oracle tabled an unsolicited $6.7bn bid for integration software maker BEA Systems. BEA’s shares shot up by as much as 33% last Friday as a result.
All eyes will be on next week’s earnings call. If Sybase doesn’t widen its stock buyback program then it could well be setting itself up for a sale, some analysts believe. Sybase has bought back nearly $59m in stock in the first six months of 2007. A bigger buyback will make Sybase a more expensive target as well.
So who would be a possible buyer? Oracle has been named again. As have other large software vendors looking to beef up their mobility software offerings. Oracle, in particular, would prefer the option of just picking up Sybase’s mobility integration and security management software assets, rather than the additional excess baggage of its database and application server products. Oracle already has strong products in those categories in its portfolio.
