The rejected offer came from Elliott Management, a hedge fund controlled by New York billionaire Paul Singer, which is known as an activist investor in tech companies it considers underperforming or undervalued. Elliott Management is now the largest shareholder at 8.7%. Its offer called for taking the company private.
At the same time it turned down the hedge fund’s bid, Compuware’s board launched a two-year plan to cut $80 million to $100 million in expenses.
The plan involved laying off at least 160 employees and closing or shrinking 16 offices. The company, with a market value of $2.3 billion, employed just under 4,500 workers worldwide this year, down from a peak of 15,356 in 1999-2000 during the Internet bubble and the proliferation of Y2K bug work.
Compuware this year also began paying its first-ever stock dividend (50 cents per share annually) since becoming a publicly-traded company in 1992.
Erik Gordon, a professor at the University of Michigan Ross School of Business, said Elliott Management’s bid appeared to be a wake-up call for Compuware’s management and board members and prodded them to pay better attention to shareholders through the changes.
The Elliott bid also gave Compuware “a huge target on its back” that has the financiers circling, he said.
“This is a perennial underperforming company that does have cash flow,” Gordon said last week. “There’s nothing that marks you for takeover or reorganization like cash flow but perennial underperformance.”