September 2, 2014 at 10:46 pm

Equity firm gives Compuware second life

Compuware's headquarters in Detroit seen Tuesday. The company has entered into an agreement to be sold for $2.5 billion to San Francisco-based private equity investment firm Thoma Bravo. (David Coates / The Detroit News)

The sale of Compuware Corp. to a private equity firm — rather than another IT company — means it will remain in Detroit, job losses will be minimized and it won’t be absorbed by its buyer, the company’s CEO says.

The $2.5 billion sale to San Francisco-based Thoma Bravo was announced Tuesday; Compuware management will be retained, but layoffs aren’t ruled out.

“The important thing was that we didn’t sell it to a strategic buyer, so the headquarters and operations will remain in Detroit,” Compuware CEO Bob Paul said in a telephone interview.

A “strategic buyer,” he explained, would have meant another IT firm — which likely would have resulted in “dramatic job loss.” Compuware already has laid off workers as part of a cost-cutting drive to improve its bottom line and become more attractive to potential buyers.

The possible sale of Compuware’s wedge-shaped, glass-walled headquarters next to Campus Martius remains a question mark.

Numerous Compuware employees, leaving the building at the end of the end of the workday Tuesday, declined comment to The Detroit News.

The sale has been unanimously approved by Compuware’s board of directors, but needs the approval of shareholders and federal regulators. It will pay shareholders $10.92 a share, a 17 percent premium above Friday’s closing price of $9.35.

The publicly traded Compuware would go private after the sale to Thoma Bravo. Compuware shares climbed 13 percent to $10.59 at Tuesday’s market close.

Tuesday’s announcement caps a turbulent two years for the business software maker, whose commitment to Detroit was a key factor in downtown redevelopment.

Compuware has been in play, seeking an acceptable buyer, since 2012. That’s the year that corporate drama began to surface and Compuware rejected a takeover attempt by New York hedge fund Elliott Management Corp.

Since then, Compuware has spun off subsidiaries, abruptly terminated all ties to its disgruntled co-founder, Peter Karmanos Jr., and undergone cost-cutting measures that resulted in layoffs.

Compuware’s software is used by companies such as Domino’s Pizza Inc. and Cisco Systems to manage complex applications. But a slowdown in IT spending by firms over the past few years meant Compuware shareholders started to push for a restructuring of the business or a sellout.

“Compuware is the clear, established leader in the categories of application performance and mainframe productivity tool,” Paul said.

He described the agreement to sell to Thoma Bravo “a win all the way around” for shareholders and the company.

But the sale to a private equity firm means there will “be some shifting” in jobs, Paul said. Compuware has about 1,200 workers in downtown Detroit and about 3,000 worldwide.

California-based Thoma Bravo, which has an office in Chicago, focuses on buying mature technology firms. Earlier this year, it announced it raised $3.65 billion for a new fund to go after more companies. In recent years, it has completed buyouts of Blue Coat Systems, an 18-year-old security software maker, and Deltek, an software company founded in 1983.

Karmanos co-founded Compuware in 1973 and was its chairman and CEO until 2011. In December 2012, Compuware rejected a bid from Elliott Management Corp. of $11 per share, calling the total offer of $2.3 billion too low.

Elliott still owns 9.5 percent of Compuware. It said Tuesday that it has agreed to vote in favor of the deal with Thoma Bravo; it is expected to close by early 2015.

Karmanos retired in March 2013 but remained as a consultant. All ties were severed, however, after he made blistering comments about the Compuware board. At the time, the board was still dealing with pressure from hedge fund Elliott Management.

That September, Karmanos was quoted as saying: “Current management of Compuware needs to get their head out ... all right, and understand they have more responsibility than playing some kind of silly game with some jerks in New York City.”

Since 2012, Compuware has gone through a flurry of moves to streamline operations and boost profitability and share price. That included an $80 million to $100 million, two-year cost-cutting program, instituting a 50-cent annual dividend and spinning off an initial stock offering of its Covisint division.

This year the company announced the sale of Changepoint, Professional Services and Uniface units for $160 million.

“Based on how long this has been vetted, and that both the board and Elliott are fully supporting the transaction, we think this is the best offer shareholders are going to get,” Derrick Wood, an analyst at Susquehanna Financial Group LLP, told Bloomberg News Tuesday.

In 2003, Compuware moved into gleaming new headquarters downtown next to Campus Martius. Some of that building is now the headquarters of Quicken Loans Inc., the flagship of downtown developer, entrepreneur and advocate Dan Gilbert.

There has been speculation Compuware is interested in selling the building; Paul did not squelch those rumors Tuesday.

“Whatever our plans may be for our headquarters are still in place,” he said, without disclosing those plans.

Compuware has played a big role in downtown revitalization for more than a decade. Karmanos was a major supporter in moving the company headquarters from Farmington Hills.

He also lobbied to get the Hard Rock Cafe and other retail and commercial storefronts into the building. He was among several corporate leaders who pledged money to build the M-1 Rail line downtown along Woodward.