12/17/2012 11:30 am ET Updated Feb 16, 2013

Elliott Management Offers To Buy Compuware For $2.3 Billion

* Offers $11/shr at 15.4 pct premium to Friday close

* Compuware says will review proposal

* Shares up 13 pct

By Sayantani Ghosh and Sruthi Ramakrishnan

Dec 17 (Reuters) - Activist hedge fund Elliott Management Corp offered to buy business software maker Compuware Corp for $2.3 billion, seven months after it pushed for a sale of rival BMC Software Inc.

Elliott, which disclosed an 8 percent stake in Compuware on Monday, is known for publicly agitating companies to seek a sale or to take control of the board.

The hedge fund, founded and run by publicity-shy Paul Singer, used a similar tack with Novell and Blue Coat Systems, resulting in the sale of those companies.

BMC, in which Elliott affiliate Elliott International Capital holds a roughly 8 percent stake, agreed in June to add two of the hedge fund's nominees to its board.

Elliott Management's $11 per share offer for Compuware represents a 15.4 percent premium to its Friday close on the Nasdaq. Compuware's shares rose to just below the offer price on Monday.

"We believe in the quality of Compuware's assets - however, its execution, profitability and growth have meaningfully underperformed," Elliott said in a letter to Compuware's board.

Compuware confirmed it had received Elliott's offer and said it would review the proposal.

S&P Capital's Jim Yin said Elliott's bid could flush out higher offers for the company.

"Although we think Elliott Management may withdraw its offer after discovering that some of Compuware's businesses have deteriorated more than expected, we think it is as likely another bidder may appear," Yin said in a note.

Compuware, which makes software to manage large computer networks, posted a 9 percent jump in sales for the year ended March 31, after several years of lackluster sales.

The company filed last week for a possible initial public offering of its Covisint Corp unit, which it said would allow the business to pursue strategic options.

Yin said larger suitors could be interested in parts of the company like Covisint, but declined to name potential bidders. He raised his price target on the company's stock by $4 to $11.

Shares of the company were up 13 percent at $10.75 -- their highest in 18 months -- in afternoon trading on Monday. The stock is up 15 percent this year, while BMC has risen 23 percent and CA Inc is up 8 percent.

All the six analysts covering Compuware's stock have a "buy" or a higher rating on it, according to Thomson Reuters data.



Flickr photo by cutedtownboi.

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