Compuware Forges Pact With Activist Elliott to Add Directors

Jan 09, 2014 4:53 pm ET

(Updates shares in fourth paragraph.)

Jan. 9 (Bloomberg) -- Compuware Corp., which spurned a bid from activist investor Elliott Management Corp. last year, reached an accord with the shareholder that staves off a proxy fight for control of the board.

In exchange for being able to nominate two directors, Elliott will abide by a standstill agreement, limiting its ability to take control of the company. The deal will last until Dec. 31, 30 days before the next fiscal year’s deadline for shareholder nominations, according to a statement today.

Compuware Chief Executive Officer Bob Paul has spent the past year trying to show shareholders he can increase their return without a takeover. That’s included selling the company’s Changepoint, Professional Services and Uniface businesses to Marlin Equity Partners for $160 million. It also spun off its Covisint division in an initial public offering in September.

Still, the shares climbed just 3.1 percent last year, trailing the almost 30 percent gain for the Standard & Poor’s 500 Index. The stock fell 2.3 percent to $10.84 today in New York.

Today’s deal gives Compuware more time to execute a turnaround, said Erik Gordon, a professor at University of Michigan’s Ross School of Business.

“Management bought another year to try to turn the company around,” he said in an e-mail. “It’s likely to be its last chance.”

Riverbed Deal

Elliott, a New York investment company that often takes an activist role, is the largest shareholder in Detroit-based Compuware. Yesterday, Elliott made a separate buyout offer for Riverbed Technology Inc. that valued that company at more than $3 billion.

As part of today’s agreement, Compuware will create a committee to advise the board on strategy and ways to boost shareholder value. Two technology executives, John Freeland and Stephen Schuckenbrock, will serve as the new board nominees.

Freeland was the CEO of SymphonyIRI Group and a former Salesforce.com Inc. and Accenture Plc executive. Schuckenbrock, meanwhile, is the CEO of Accretive Health Inc. and a veteran of Dell Inc. and Electronic Data Systems Corp. Shareholders will vote for the new nominees at their annual meeting in March.

Of the 11 members on the new board, six will have been added in the past year, a sign of the company’s willingness to change, Chairman Gurminder S. Bedi said in the statement. Compuware also has begun a two-year program to cut expenses by as much as $100 million and initiated an annual dividend of 50 cents a share.

“The reconstitution of our board of directors is an important element of the aggressive strategic transformation that is taking place at Compuware,” he said.

--Editors: Nick Turner, Crayton Harrison