BMC Takeover Talks Turn Hostile

Hedge fund formally nominates new slate of directors that would favor a sale of the management software company.

Paul McDougall, Editor At Large, InformationWeek

June 14, 2012

3 Min Read

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The multi-billion dollar hedge fund looking to force a sale of BMC Software took its campaign directly to shareholders Thursday, filing a definitive proxy statement in which it has nominated a slate of directors sympathetic to selling the company.

"We are asking you to vote to elect our four independent, highly qualified nominees to the BMC Board of Directors, who will bring fresh, stockholder-focused perspective to enhancing BMC's value," said Jesse Cohn, a portfolio manager with Elliott Management, in a letter to BMC shareholders.

Elliott's slate includes former HP sales and marketing chief Thomas Hogan, Infor founder and former CEO Jim Schaper, former Salesforce CEO John Dillon, and former HP services exec Andy Mattes. "These excellent nominees bring extensive software and technology expertise," said Cohn. BMC shareholders will get the chance to vote on Elliott's slate at the general meeting on July 25th.

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Cohn said he was launching the proxy fight because negotiations with BMC CEO Bob Beauchamp and the company's board have gone nowhere. "Instead of engaging constructively with us, the company's existing board of directors and management team have adopted a 'bunker' mentality of short-sighted corporate defense with the goal of maintaining the status quo," Cohn said in the letter, a copy of which was filed with the Securities and Exchange Commission.

"We have been very encouraged by the large number of BMC stockholders who have reached out to us in support of our ideals and who are frustrated by the board's resistance to even considering new approaches to maximizing stockholdervalue," said Cohn.

Elliott believes that BMC has been poorly managed lately and is underperforming compared to industry peers like CA. It has said previously that, under Beauchamp, BMC did not move quickly enough to embrace the cloud and software-as-a-service markets, and that sales efforts have been poorly managed.

BMC's current leadership team insists the company is headed in the right direction. "BMC is executing its strategic plan and is well-positioned to create stockholder value by capturing the growing demand for enterprise IT management software created by the explosion of complexity in enterprise IT," the company said in its own letter to shareholders this week.

BMC said that, among other things, it's building out its sales force and expanding its partner network in order to become more competitive.

If BMC does end up in play, the list of possible buyers is thought to include Dell, Oracle, and IBM. BMC's net earnings fell 12.1%, to $401 million, in its most recent fiscal year, even as revenue increased 5.2%, to $2.17 billion.

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About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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