Hedge Fund Plans To Spend $2Bn+ – Hedge Fund Holiday Shopping

A New York hedge fund has offered to acquire Detroit-based Compuware for $2.3 billion with hopes of taking the publicly-traded company private so it can be “fixed.”

Elliott Management Corp., which currently holds 8% of Compuware’sstock, offered a bid of $11-per-share to the software firm’s board of directors Monday morning. Compuware is headquartered on Campus Martius in downtown Detroit and is Michigan’s largest technology company.

The hedge fund’s bid is a 15% premium over the company’s closing price Friday of $9.53. But Elliott claims the price was “substantially inflated” from publicity over a U.S. Securities and Exchange Commission filing in late November, when Elliott started buying up additional shares.

Jesse Cohen, a portfolio manager for the hedge fund, told the Free Press that Compuware could benefit from large-scale changes to how it does business. However, it is too early to know for certain what those changes would be.

“Compuware has some incredibly good technology, but for years it’s been underperforming,” Cohen said in a phone interview. “It just hasn’t been run that well, and we feel there’s just an incredible opportunity for it to be taken private and to be fixed.”

In a brief statement, Compuware acknowledged its board of directors has received the unsolicited takeover proposal.

“The Board said it will review all aspects of the proposal in consultation with its financial and legal advisors in due course. The Board emphasized that shareholders need not take any action at this time,” the statement said.

Compuware stock was up 12.7% to $10.74 earlier this afternoon.

The company reported lower revenues and profit in its latest fiscal quarter that ended Sept. 30. Net income was $10.6 million, down from $22.7 million in that quarter in 2011. Its most profitable sector is mainframe applications, according to public filings.

Compuware announced last week it has submitted to the SEC draft registration for a proposed initial public offering for its Covisint cloud-computing business. The company previously considered a Covisint IPO in 2007.

Elliott Management is an affiliate of a hedge fund founded in 1977 by billionaire financier Paul Singer. The fund averages annual returns of 14% with only two down years – 1998 and 2008. It claims extensive experience in structuring and executing acquisitions of tech companies, particularly software companies.

Elliott has a segment that specializes in distress companies that has been called a “vulture fund.” However, the segment bidding on Compuware is aimed at good companies.

“We think we can maximize the value of this company and make it a better company ultimately,” Cohen added.

The hedge fund’s offer comes a month after Compuware’s founder and former CEO, Peter Karmanos Jr., 69, announced that he would step down as executive chairman at the end of March 2013.

The hedge fund has not made any decisions regarding Compuware’s downtown headquarters or the employees there, but notes that Detroit is a favorable location to do business with auto companies.

Compuware has 4,567 employees worldwide. The number of employees at its worldwide quarters was not immediately available. The company owns the 15-story downtown building.

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