Detroit's Compuware Corporation is now on track to be sold to a private equity investment firm for $2.5 billion.
In a statement Tuesday, Compuware said it has a deal, which is pending shareholder approval, with Thoma Bravo LLC -- which has offices in Chicago and San Francisco.
Compuware has agreed to immediately discontinue its quarterly cash dividend. At closing, Thoma Bravo will acquire 100% of Compuware’s outstanding shares and Compuware will become a privately-held company.
The Compuware board of directors unanimously approved the agreement. The transaction, which is expected to close by early 2015, is subject to approval from Compuware’s shareholders, regulatory approvals, and other customary closing conditions. The closing of the transaction is also subject to the completion of a disposition of Covisint.
Terms of the agreement
Compuware shareholders will receive an aggregate value of approximately $10.92 per share, representing a premium of approximately 17 percent to the Company’s stock price as of the close of trading on Aug. 29, 2014.
Thoma Bravo will pay a cash purchase price of $10.43 for each outstanding share of Compuware common stock, less the pro rata portion of the applicable corporate tax that will be owed in connection with the spin-off of Covisint, currently estimated at $0.18 per share based on the current market price of Covisint, for a net cash payment of approximately $10.25 per share. The parties have agreed that within 60 days following the date of the merger agreement, Compuware will effectuate the pro rata distribution to its shareholders of the remaining shares of Covisint owned by Compuware, resulting in a distribution of Covisint shares representing approximately $0.67 per share of Compuware common stock based on the closing price of Covisint on Aug. 29. During the 60-day period, Compuware may seek a higher value alternative for its Covisint shares, in which case the proceeds, net of tax and certain charges, of such disposition will be paid to Compuware shareholders.
“This is the right transaction for Compuware at the right time, and reflects a thorough Board review of strategic alternatives and the work of a committee established earlier this year to focus on value-generating steps. This agreement provides shareholders with immediate and substantial cash value, a significant premium to our share price, and the ability to complete the Covisint spin-off to shareholders. Thoma Bravo is an ideal partner for Compuware, adding significant application software, services, and financial expertise," said Gurminder S. Bedi, Independent Chairman of the Compuware Board.
Elliott Management, which owns approximately 9.5 percent of Compuware’s common stock, has entered into an agreement with Thoma Bravo agreeing to vote its shares in favor of the transaction.
There is no financing condition associated with the proposed acquisition. Jefferies, Credit Suisse and Deutsche Bank have agreed to provide debt financing in connection with the transaction.