Compuware Corp (CPWR) recently announced the pricing of the initial public offering (:IPO) of Covisint Corp, its wholly-owned subsidiary. The shares begin trading today under the symbol COVS. Covisint Corp filed an S-1 statement with the Securities and Exchange Commission (:SEC) in May this year.
However, at that time Covisint did not specify the number of shares for the IPO and also the price range. Currently Covisint is offering 6.4 million shares for $10 per share, which represents approximately 17.6% of its issued and outstanding shares. Moreover, the underwriters have a 30-day option to purchase up to an additional 960K shares at the IPO.
Credit Suisse Group’s (CS) U.S. division, Credit Suisse Securities LLC acted as lead book-running manager, while Pacific Crest Securities LLC acted as joint book-running manager for the offering. Evercore acted as a co-manager.
In Jan 2013, Compuware rejected a $2.3 billion bid from activist investor Elliott Management, stating that the $11.00 per share offer was inadequate. Post the Elliott offer, Compuware had reportedly solicited a number of other private equity funds such as Blackstone Group LP, TPG Capital LP and Golden Gate Capital for a possible buyout. However, to date nothing concrete has materialized from these discussions.
As a part of Compuware’s restructuring initiatives, Covisint’s IPO is expected to give it greater flexibility in pursuing strategic growth opportunities. Compuware intends to offer approximately 20% of Covisint’s Class A stock in the IPO and will distribute its remaining shares directly to shareholders after the completion of the IPO.
Compuware’s 3-year restructuring plan is expected to save approximately $60.0 million. For fiscal 2014, the plan is expected to save a minimum of $20 million. On May 16, 2013, Compuware declared its first dividend of 12.5 cents that was paid on Jun 19, 2013, as a part of its restructuring program.
We believe that Compuware’s restructuring initiatives are positive for shareholders over the long term. The company’s strong product portfolio, new program wins and innovative product portfolio will help it to counter strong competition from the likes of CA Technologies (CA) and International Business Machines (IBM) going forward.
However, execution challenges (related to acquisition, geography and people) are major headwinds going forward.
Currently, Compuware has a Zacks Rank #3 (Hold).