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Compuware investor lost patience with shake-up, slams down ultimatum

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Activist investor Starboard Value has told Compuware it should look for a buyer right now or come up with a new restructuring plan for the firm.

Compuware has been ripe for a takeover since it rejected a $2.3bn offer from its largest shareholder Elliott Management in January, but things have been quiet since it said no to Elliott's bid.

Starboard, which is a five per cent stakeholder in the firm said in a letter to the board that although it appreciated its efforts to turn things around at the company, it felt that restructuring efforts had gone on for too long without coming to any conclusion.

"It has been almost a year since Elliott Management offered to acquire the company for $11.00 per share. While the company has made some progress on its restructuring and value creation initiatives, investors are still left to wonder how Compuware’s long-term strategy will look," Starboard complained.

"Additionally, we believe the length of time that the company has spent exploring strategic alternatives, without any conclusion to the process, has created a significant overhang on the stock price.

"We believe the constant state of flux that has existed for the past year at Compuware is one of the primary reasons that the company’s stock price continues to trade below Elliott’s offer price, despite the positive steps the company has taken to unlock value."

Starboard said that if the company wanted to stay independent, it wanted to see changes to its board and a new restructuring plan for the company, including a $450m share repurchase programme, higher cost cuts, a dividend increase for shareholders and the sale of some assets. The investor wants Compuware to cut $150m from its costs, an extra $50m or so than the current plan calls for.

Rather than any restructuring plan though, Starboard said that it would prefer the company to find itself a buyer.

"A standalone restructuring of Compuware will involve a great deal of execution risk and proper oversight. On the other hand, a sale of the company now at an acceptable premium would immediately deliver value to shareholders and would carry much less execution risk," it said.

Bob Paul, chief exec at Compuware, said in response to the letter that the company had already taken "significant measurable steps" to create shareholder value. In an update to shareholders, Paul said that the company had a number of potential independent director candidates in mind for its board and it was sticking to its existing plan of action for now.

"The current board, along with management, has been successfully executing the transformation process we started earlier this year. We are excited about the opportunities available to Compuware and its shareholders as we pursue our focused plan of action," he added. ®

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