Singer fund Elliott steps up battle with BMC

NEW YORK Thu May 31, 2012 5:28pm EDT

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NEW YORK (Reuters) - Elliott Management, a $20 billion activist hedge fund run by Paul Singer, has stepped up its assault on BMC Software Inc BMC.O, repeating calls for the company to sell itself and appoint new directors.

In a 36-page presentation filed with the Securities and Exchange Commission on Thursday, Elliott said the software company's "execution over the past several years has been poor on numerous fronts, and its growth has been non-existent."

It said BMC faces increasing competition from a host of other industry players.

BMC shares closed down almost 2 percent on Wednesday and fell another 2 percent in Thursday morning trading, to $42.07. The shares are up about 30 percent so far this year.

"BMC's board would be well served to include more directors with technology backgrounds, especially in today's rapidly changing marketplace," Elliott said in the presentation, naming former executives at Hewlett-Packard (HPQ.N) among its slate of four nominees to the BMC board.

Elliott presented a list of potential buyers of BMC, including technology giants such as International Business Machines Corp (IBM.N), Oracle ORCL.O and Dell DELL.O, and private equity firms including KKR (KKR.N), Blackstone Group (BX.N) and Bain Capital.

A BMC spokeswoman said, "As previously said by the Company, the BMC Board does not believe the Elliott proposal is in the best interests of our stockholders."

The hedge fund firm, founded by the billionaire Singer in 1977, also heaped criticism on BMC's "ineffective" merger and acquisition strategy, saying the company takes too long to make acquisitions and pays too much.

Elliott owns 6.5 percent of the common stock of BMC, which makes software for storage management, database performance and data recovery.

Elliott has taken similar stakes in other technology companies, including Novell Inc and Blue Coat Systems Inc, which resulted in the sale of those companies.

In a letter to BMC's board of directors, also filed with regulators on Thursday, Elliott portfolio manager Jesse Cohn said the hedge fund and other shareholders "remain frustrated by the board's intransigence."

BMC has so far resisted Elliott's proposals for the Houston-based company to sell itself, and in May it moved to prevent a hostile takeover by adopting a "poison pill" shareholder-rights plan.

Another activist hedge fund run by a former portfolio manager for the industry's original corporate raider, Carl Icahn, recently took a 1 percent stake in BMC. Corvex Management LP bought 1,541,993 shares of BMC, according to a regulatory filing in May.

(Reporting By Katya Wachtel; editing by John Wallace and M.D. Golan)

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Comments (1)
HnCalifornia wrote:
So which is it? Does the proposed board team help “unlock” the potential value with oversight of the management team execution, or, does Elliot feel that “unlocking” will happen because of a sale? I think that Elliot’s intentions are not really clear.

I understand that the board members proposed are ex-Large-Technology-Company people. What have they done recently?

Of all the companies listed as potential suitors, the only one that would want to buy BMC sounds like Dell. That too does not make much sense because of the depressed value of Dell stock today. Moreover, if there really are not many suitors for the company, why do we feel that the value is going to increase?

Perhaps Elliott should look at a longer duration to provide comparative numbers. CA, who is the driver for a lot of the comparisons, has had a dismal period leading to 2008, so the only way they could go was up.

Jun 01, 2012 10:49am EDT  --  Report as abuse
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