Elliott Management Zeros In On Compuware Corporation

Hedge Funds’ kingpin Paul Singer, both in terms of political influence and shakeup skills, hits once again. The brand new target is Compuware, a software services provider. Today, the $20 billion hedge fund put up a bid to buy Compuware Corporation (NASDAQ:CPWR) for $2.3 billion.  In a letter addressed to the company’s BoD, Elliott’s portfolio manager Jesse Cohn said, “As a result of Elliott’s significant experience in the software sector and our deep public diligence to Compuware, we believe Elliot is uniquely situated to deliver maximum value to the company’s stockholders.”

Cohn also said in his letter that Compuware has lagged the NASDAQ index by 6 percent and underperformed the S&P 500 by 34 percent in the last two years. Elliott has put up a bid to buy Compuware Corporation (NASDAQ:CPWR) at $11 per share. The offer is subject to due diligence and holds in case Elliott is able to recruit reasonable financing. The firm holds 8 percent of CPWR stock. Following the announcement, CPWR rose as high as 14 percent in trading.

Elliott Management Zeros In On Compuware Corporation

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While it may seem rather unusual for a hedge fund to bid for a public company, it is not the first such incident and most certainly not a first for Elliott Management Corp. The firm certainly has a lot of experience when it comes to shaking up tech companies. Elliott has previously done the same with Novell in early 2010,  where it offered to buy the company at about $2 billion. The offer stimulated the sale of Novell to Attachmate Corporation for $2.2 billion. At that time Elliott’s bid for Novell was 20 percent higher than the price at which the fund had bought the stock. In case of Compuware Corporation (NASDAQ:CPWR), the $2.3 billion bid is 25 percent higher than the buying price. Other tech targets of Elliott have been BMC Software, Inc. (NASDAQ:BMC) where it has been campaigning for a sale for several months now. The market cap of BMC Software, Inc. (NASDAQ:BMC) is $6.8 billion, the software company accepted two members of Elliott to its BoD and acceded to consider the option of selling.

Elliott also has a 8.5 percent stake in Brocade Communications Systems, Inc. (NASDAQ:BRCD) where it pushed for a change in board’s executive seat. Iron Mountain Incorporated (NYSE:IRM) has also been a target of Elliott’s activism.

On Dec 12, Evercore Partners Inc. (NYSE:EVR) raised their price target for Compuware from $11 to $12 on account of a significant growth potential in the Application Performance Management (APM) unit. Sales in the unit have increased manifold and the company is also diversifying its target markets, the EBIT margins for APM business will reach in the teens zone soon.

However the sensitive part of Compuware’s business is the mainframe computing unit which drives 40 percent of the company’s revenues.  Elliott’s bid shows confidence in Compuware’s ability to protect its soft spot.