Software and technical services provider Compuware Corp. (CPWR: Quote) said Friday that its board of directors has concluded that hedge fund Elliot Management Corp.’s buyout offer “significantly undervalues” the company.
The Detroit, Michigan-based company also said it plans to execute a spin off of the remaining Covisint shares to Compuware shareholders following its proposed initial public offering, so as to fully unlock the value of the business.
In addition, the company plans to initiate an annual dividend of $0.50 per share and launch a three-year cost-reduction program that targets savings of at least $20 million in fiscal 2014.
In mid-December, Elliot Management offered to acquire Compuware for $11.00 per share. The hedge fund holds an about 8 percent stake in Compuware, making it one of the largest shareholders of the company.
Bob Paul, Chief Executive Officer of Compuware said, “We believe that selling the company at $11.00 per share does not take into account our progress returning the business to profitable growth and our future prospects. We are confident our plan will accelerate our progress and provide significant, near-term returns as well as future upside to our shareholders.”
Paul added, “While we are focused on executing and delivering on our plan, the Board will carefully review and evaluate any credible offer it receives, including from Elliott, that delivers full value to its shareholders.”
Compuware, in December, submitted a registration statement to the U.S. Securities and Exchange Commission for a possible IPO of about 20 percent of Covisint’s Class A common stock. The company expects to distribute the remaining Covisint shares directly to Compuware shareholders within twelve months of completing the IPO.
Further, Compuware said its board completed a comprehensive review of the company’s alternatives and approved a plan to return capital to shareholders through an annual dividend of $0.50 per share, beginning in the first quarter of fiscal 2014. This will be at a yield greater than 4.5 percent based on Compuware’s current stock price.
The company also said it will launch a three-year cost reduction plan that will eliminate at least $60 million in G&A and non-core operational expenses, with a minimum of $20 million in savings to be realized in fiscal 2014.
CPWR closed Thursday’s trading at $10.76, down $0.12 on a volume of 1.77 million shares.
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by RTT Staff Writer
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