Is the bid for Compuware (NASDAQ: CPWR) just the beginning of more bids to come? Alternatively, it may be the riskiest bet on Wall Street this winter. Is this like the Marvin Davis bid for United Airlines (NYSE: UAL), which when competing bids never came, the ultimate financing for the original offer never came either? If you recall, that deal blew up not only shares of UAL, but the entire market back in '89.
Here’s what we do know. If there was ever a time for the market to recognize the value of CPWR, it’s now. In fact on Friday, Compuware revealed that its Covisint subsidiary, which makes business communication software, was in the midst of going public. A move aimed at truly unleashing the value of the stock. However, more telling is who and why the offer was made. Elliott Management already has a large bet on Compuware and owns approximately 8 % of Compuware shares. Now, pursuant to its proposal, Elliott would pay $11 per share, which is 25 percent higher from Elliott’s revealed investment in Compuware back in November.
Is this proposal really what it seems? Is it a genuine offer, or is it something else? Regardless, it’s probably not the number many investors were looking for. Actually, this reeks of sham offer - aka “bait” – “an offer to induce another offer? Let’s look at their history. In 2010, just like it did for Compuware, Elliott proposed to offer $2 billion for Novell, which after lawsuits forcing the company to get a real offer, Novell was sold to the highest bidder, Attachmate Corporation for about $2.2 billion.
Elliott also induced BMC Software to put itself up for sale, and BMC eventually agreed to in October. In a letter to Compuware’s board on Monday, Elliott stated that it believed in the quality of Compuware’s assets; however shares of CPWR have underperformed the major indexes.
If you’re still wondering if this is a real offer or just a ploy to put Compuware in play, note that Elliott’s proposal is not just subject to due diligence but also the availability of financing. If you own shares of Compuware, we would be encouraged to hear your thoughts; in fact we have a few of our own for mindful investors.
If you’d like to learn more, contact us here.