RE:BMC Not to much of a premium, but a formal deal none the less. Interesting that the near term rumors were true this time. Most of the time they are just that, rumors. Because of the low premium. It seems appreciation was already built into the current stock price before the formal announcement.
P.S. IMO it's only a matter of time before TDC gets into the TT rumor mill again. I'm watching it, but passing for now.
BMC Deal Shows How an Activist Strategy Can Work By ROBERT CYRAN Elliott Management has once again pushed a technology firm into selling itself.
This time, BMC Software is going for $6.9 billion to a private equity group led by Bain Capital and Golden Gate Capital. At $46.25 a share, the 2 percent headline premium over Friday’s closing price may seem tiny. But that’s more than a 30 percent return for Elliott, adding to its record of similar successes at Novell, Packeteer and Blue Coat.
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BMC was a prototypical case of a technology company that had lost its mojo. Its software for running mainframe computers is solidly profitable. But public market investors don’t like businesses that are in long-term decline as their customers gradually shift to newer technologies. BMC’s server and network business has better long-term prospects, but growth has been sluggish. On top of that, BMC’s margins were lower than those at bigger peers, and management had squandered capital on acquisitions in an attempt to stay relevant.
Tech zombies can, however, wander about for years — and throw off a lot of cash in the process. BMC, for example, has been promoted as a potential takeover candidate for the last decade. Elliott emerged as a big investor in BMC in early 2012. While the stock quickly rose from around $35 when news of the fund’s involvement broke, it took about a year of effort to actually achieve a sale. The campaign included public pressure for a sale, a proxy fight, the appointment of two new directors to the board and eventually a successful auction.
Plan A was probably for a deep-pocketed rival to pay up for BMC. But with Hewlett-Packard and Dell struggling, I.B.M. out of the picture for antitrust reasons, and SAP and Oracle consumed with bigger battles, that didn’t happen. The relatively predictable nature of BMC’s enterprise software business – in contrast, say, to Dell’s more quickly declining PC operations – and its relatively unlevered balance sheet ensured that as an alternative there would be private equity interest.
Not only did Elliott stick to its guns, a characteristic also evident in the firm’s pursuit of Argentina over defaulted bonds, the fund also picked its target so that even Plan B stood a good chance of proving profitable. Flightier would-be activists could learn from that.
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