(By Mani) Compuware Corp. (NASDAQ: CPWR) has rejected Elliott Management Corp.'s $11 a share takeover bid citing that the offer undervalues the company and is not in the best interest of shareholders. The company also plans to spin-off remaining Covisint shares to Compuware shareholders following an initial public offering, or IPO.
In December, activist investment firm Elliott Management offered to buy business software manufacturer Compuware for $2.3 billion.
Commenting on the Elliot's offer, Paul 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."
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However, the Board will carefully review and evaluate any credible offer it receives, including from Elliott, that delivers full value to its shareholders..
Compuware's shares could see upside in the medium to long-term, helped by its revenue potential within the application performance management (APM) business and focus on margin expansion. Compuware has refined its product lineup and now has a primary focus within the application performance management market, which has emerged as one of its fastest growth business.
"We are committed to creating value for shareholders and the actions announced today are focused on increasing profitability, building on the momentum of our transition to higher-growth businesses, and returning capital directly to shareholders," said Bob Paul, Chief Executive Officer.
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Compuware, which stabilized its Mainframe business and realigned its operating structure. has made significant progress positioning APM and Covisint for growth rates between 20 percent and 30 percent.
In December, Compuware submitted a registration statement for Covisint the U.S. Securities and Exchange Commission for a possible IPO of about 20 percent of its Class A common stock. The company expects to distribute the remaining Covinsint shares directly to Compuware shareholders within 12 months of completing the IPO. The Covisint subsidiary is a hosted service that provides secure information flow for industry-specific solutions.
Compuware also launched a 3-year cost reduction plan that would save at least $60 million in G&A and non-core operational expenses, with a minimum of $20 million realized in fiscal 2014.
In addition, it plans to declare an annual dividend of 50 cents per share, at a yield greater than 4.5 percent based on Compuware's current stock price, payable quarterly starting next quarter.
Shares of Compuware closed Thursday's regular trading session at $10.76 on Nasdaq.