Bloomberg reports that Compuware, the 40 year old billion dollar Detroit based software company, has been making presentations to private equity companies who may be potential purchasers of the company. The companies mentioned include Thoma Bravo and Golden Gate Capital, who, like Compuware, have declined to confirm the Bloomberg report (based of course on interviews with “people aware of the situation”).
Compuware turned down a $US2.3 billion offer from Elliott Management in January. That offer valued Compuware at $11 a share, which Compuware says undervalued the company. That would seem to be the case – it closed at $11.95 on the NYSE yesterday. Its share price has risen by a third since takeover rumours began last November. The company has cut costs recently, laying off 160 staff and many middle level managers.
Compuware’s founder and executive chairman Peter Karmanos Jr is dubious about the motives of the hedge funds and private equity partners that seem to be circling the company. "They would take the company and make as much money as they can as fast as they can,” he said in an interview with the Detroit Free Press. “If that means breaking it up, throwing the pieces into the wind and eliminating a company in Detroit, they don't mind that.”
He said they are valuing the company a around $12 a share. “But it’s worth more than that – maybe $15. And we can double it.”
Compuware is something of a Detroit institution. It was founded in the city in 1973, and since Burroughs moved out after its merge with Sperry to form Unisys in the 1980s it has been the only major IT company headquartered in the city. It became a local hero when it moved its office to an impressive purpose built office building in downtown Detroit from the suburbs in 2003, a major factor in Detroit’s urban renewal.
Karmanos is 70 next week, and retires from the board at the end of the month. Compuware is his life’s work. It has specialised in utility software for IBM mainframes, though it has diversified in recent years. But times have moved on, and the company’s fate will not be Karmanos’s decision.
If Compuware goes, there won’t be many of the mainframe software companies that dominated the industry 20 years ago left. Names like Goal, Duquesne, SKK, Uccel and Legent, and many others, are long gone. There was a frenzy of mergers and acquisitions in the 1990s, with most eventually acquired by Computer Associates (now known as CA) and BMC.
That’s about all that’s left.