NEW YORK Private equity firm Silver Lake is proceeding with an auction for its information technology management company Serena Software Inc after talks aimed at selling Serena to its technology peer Attachmate Corp ended, according to people familiar with the matter.
Silver Lake is now in talks with a small number of specialist buyout firms, including Veritas Capital Fund Management LLC and Platinum Equity LLC, about selling its majority stake in Serena, the people said.
A sale could value Serena Software at between $500 million and $700 million, much less than the $1.2 billion valuation Silver Lake placed on it when it took it over in 2006, the people said.
Nevertheless, Silver Lake's latest $10.3 billion private equity fund was oversubscribed by investors earlier this year, making it more inclined to accept a loss on Serena Software and move on, the people said.
The people spoke on condition of anonymity because the sale process is confidential. Representatives for Serena Software and Attachmate did not respond to requests for comment while Silver Lake, Veritas Capital and Platinum equity declined to comment.
San Mateo, California-based Serena provides software to companies looking to streamline management processes. Some of its products compete with CA Inc, IBM Corp and Compuware Corp.
Silver Lake committed $335.5 million in equity in the $1.2 billion deal to take Serena private in 2006. It has not taken any cash dividends from the company since, according to regulatory filings.
Attachmate, owned by Francisco Partners LP, Golden Gate Capital LLC, Thoma Bravo LLC and Elliott Management Corp, has been considering acquisitions to boost growth since its $2.2 billion takeover of Novell Inc in 2011.
But Attachmate's private equity owners could not meet Silver Lake's price expectation on Serena Software, the people said.
The highly competitive management software sector has seen major private equity dealmaking activity this year, culminating in the $6.9 billion leveraged buyout of BMC Software Inc earlier this year by a consortium led by Bain Capital LLC and Golden Gate.
Compuware has also put itself on the block after rejecting a $2.3 billion offer from Elliott, its biggest shareholder. Chief executive Bob Paul told Reuters this month that he had not received any takeover offer high enough.
Serena launched two restructuring plans this year to address falling profits and boost operating margins. The company reduced its workforce by 8 percent in the first quarter and 24 percent in the second quarter, for a loss of 175 employees in total. The company expects to cut operating expenses for its fiscal year 2014 by 17 percent to 19 percent from a year ago.
In the 12 months ending January 31, 2013, Serena reported adjusted earnings before interest, tax, depreciation and amortization of $74.4 million, down from $85.8 million over the same period a year ago. The company had total outstanding debt of $410 million as of the end of July.
Silver Lake currently owns about two-thirds of Serena, with the remainder owned primarily by Douglas Troxel, who founded Serena in 1980 and who was its chief executive officer until 1997. He still sits on Serena's board of directors.