Compuware, one of the largest employers in the city of Detroit, is likely to become a privately held company under a proposed deal with a private equity firm.
Thoma Bravo, LLC agreed to buy the company for around $2.5 billion. The deal still has to be approved by shareholders.
David Gelles of the New York Times blog DealBook writes this transaction ends the pressure put on the company by the hedge fund "Elliot Management":
The agreement ends a process that began in 2012, when Elliott took a stake in the Detroit-based company and made an offer of $11 a share to acquire it. Elliott, which still owns 9.5 percent of Compuware, has agreed to vote in favor of the deal.
Thoma Bravo will pay $10.92 a share for Compuware, less than Elliott’s original offer. But Compuware investors are likely to support the deal, which represents a 17 percent premium to Compuware’s stock price last week, and comes after a series of moves intended to create value for shareholders.
Compuware's CEO, Bob Paul, tells the Detroit Free Press that he doesn't expect any big moves for the company and that its headquarters will remain in downtown Detroit.
“Because we didn’t sell it to a strategic competitor, we are firmly entrenched in Detroit,” Paul said.
“The business will continue to operate as is, but just in a private setting now. The leadership team remains intact,” Paul added.
Paul said Compuware’s new owner-to-be, private equity firm Thoma Bravo, is experienced in working with software firms and existing management to improve operations.
The company currently employees around 1,100 to 1,200 people in downtown Detroit, according to the Freep.
Erik Gordon is a professor at the Ross Business School at the University of Michigan. He says the sale is a sad day.
He says in the 1980s, Compuware was a giant in the IT industry, when mainframes ruled. Then, came PCs - followed by wave after wave of innovation.
"Compuware lived in its glorious past, and now has sort of come to at least a soft landing for its future. At least it didn't close its doors."
Gordon says the situation could be a lot worse, had a rival software firm bought Compuware. He says Thoma Bravo owns a number of mid-size software companies.
"These are people who really know what they are doing," says Gordon. "It's not just a bunch of money guys who are going to come and leverage up the deal and take all the money in the middle of the night that they can get out. These guys run software companies. So it's a real good development for Compuware."