(Reuters) - Private equity-owned business software company BMC Software Inc [BSII.UL] has ended talks to merge with enterprise software maker CA Inc after struggling to arrange financing for the deal, three people familiar with the matter said on Thursday.
The termination of the negotiations shows that banks are still reluctant to finance leveraged buyouts of large, mature technology companies at hefty valuations. It follows unsuccessful attempts earlier this year by Citrix Systems Inc, another business software maker, to go private.
The negotiations collapsed after CA told BMC that it expected the deal to take at least 18 months to close once signed, because it anticipated a thorough review by antitrust regulators - especially regarding overlap in the two companies’ mainframe businesses, the sources said.
CA asked BMC to guarantee it will have the acquisition financing available until the deal closes, the sources added. BMC countered that it would be very difficult to get banks to extend debt financing commitments for as long as 18 months, according to the sources.
The sources asked not to be identified because the negotiations were confidential. CA and BMC declined to comment.
CA shares fell 10.2 percent to close at $31.10 on Thursday, after the Wall Street Journal first reported that the talks with BMC had ended.
A merger of BMC and CA would have been the biggest leveraged buyout since Dell Inc’s [DI.UL] $24.4 billion take-private transaction in 2013.
CA, formerly known as Computer Associates, has its roots in providing mainframe computers used by banks and other large institutions. It has been trying to shift its business to the cloud, and announced in March it was acquiring application security firm Veracode for $614 million.
BMC, which provides software that helps corporations organize their tech support functions, was taken private for $6.9 billion in 2013 by a buyout consortium led by Bain and Golden Gate, after pressure from activist hedge fund Elliott Management Corp.
Reporting by Liana B. Baker in San Francisco and Greg Roumeliotis in New York; Editing by Matthew Lewis