Detroit-based Compuware said Friday it won't be taking up Elliot Management on its $2.35 billion offer.
The New York-based investment firm had wanted to acquire the software developer for $11 per share.
Elliott currently holds an 8 percent stake in Compuware. It says that while the Detroit-based company has strong assets, its profitability and growth have significantly lagged in recent years.
In a statement, Compuware's Board of Directors said, "Elliott Management Corporation's proposal to acquire all of the outstanding shares of Compuware for $11.00 per share significantly undervalues the company and is not in the best interest of shareholders."
While it will still evaluate any credible offers, Compuware is going to take the following the following actions:
- Launching a 3-year cost reduction plan that will eliminate at least $60 million in G&A and non-core operational expenses from the company, with a minimum of $20 million realized in FY 2014. The company expects that additional opportunities to rationalize and reduce costs and focus its business will be available as it continues to execute the plan.
- Executing a spin-off of Covisint to Compuware shareholders following the initial public offering, to fully unlock the value of this business. In December, Compuware submitted a registration statement for Covisint Corporation to the U.S. Securities and Exchange Commission for a possible initial public offering of approximately 20% of its Class A common stock. The company expects that within 12 months of completing the IPO it will be distributing the remaining Covisint shares directly to Compuware shareholders, enabling shareholders to participate fully and directly in Covisint's future and favorable prospects.
- Implementing a plan to return capital to shareholders through 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.
Karmanos stepping down but staying involved
The offer comes about a month after Compuware founder Peter Karmanos Jr. announced plans to step down as executive chairman next year. He stepped down as CEO in 2011.
The 69-year-old is expected to become a consultant for Compuware, earning $600,000 a year. The move to leave the company's board is effective March. 31. Karmanos in 2011 stepped down as Compuware's chief executive.
Karmanos will be succeeded as nonexecutive chairman by Gurminder Bedi, the company's lead independent director.
Karmanos moved Compuware's headquarters in 2002 from suburban Farmington Hills to a new building in downtown Detroit. He had said earlier that he was aiming to retire by 2013, when he turns 70 and the company turns 40.