Investors in Software AG blasted management for backing a €2.4 billion ($2.6 billion) takeover bid by Silver Lake Management while failing to seriously consider a rival offer.
(Bloomberg) — Investors in Software AG blasted management for backing a €2.4 billion ($2.6 billion) takeover bid by Silver Lake Management while failing to seriously consider a rival offer.
Software AG’s executives have stood by Silver Lake’s plan to buy the company for €32 per share, even while another private equity firm Bain Capital is offering at least €2 more a share.
Shareholder representatives at the annual general meeting Wednesday said Silver Lake, which holds two seats on Software AG’s board, had access to insider information before submitting its offer and benefited from favorable treatment from the company’s takeover committee.
“Cooperation with Silver Lake must not lead to competing takeover bids being nipped in the bud to the detriment of all other shareholders,” said Christian Strenger, who represents investors that collectively hold about 5% of Software AG.
The shareholder blowback stands to further escalate a battle between two private equity giants over the German-headquartered software company, which had lost more than a third of its value in the year before the bidding war started in April.
Software AG Chief Financial Officer Daniela Buenger said at the meeting that the committee reviewed bids from Bain Capital and declined to conduct due diligence on its latest offer because “it was not superior to Silver Lake’s.”
Silver Lake did not immediately respond to a request for comment.
The takeover committee is backing Silver Lake’s bid even after Bain increased a non-binding offer to at least €34 a share. Software AG’s management has said that Silver Lake’s offer is preferable because it’s very likely to go through and because it will keep the software maker as an independent, German-headquartered company. The buyout firm has secured a 30.1% stake in Software AG, including a fully binding share purchase agreement for a 25.1% stake from its largest shareholder.
A number of shareholders had already spoken out against Software AG’s apparent unwillingness to negotiate with other bidders. Portfolio manager Harris Associates LP said this week the offer “materially undervalues” the business. Schroders Plc, its largest outside shareholder, criticized the company for not engaging with other suitors.
Read More: Software AG Shareholder Harris Criticizes Silver Lake Offer
Christian Lucas and James Whitehurst, who are Silver Lake representatives on Software AG’s supervisory board, skipped the general meeting due to scheduling conflicts. Lucas, who’s Software AG’s chairman, and Whitehurst recused themselves from the deal negotiations because of their affiliation with the private equity bidder.
Bain has said its bid, which is dependent on due diligence and financing, is superior “in all scenarios” and that it would eventually combine Software AG with its US portfolio company, Rocket Software Inc.
Software AG was founded in 1969 and builds software that helps connect different systems within an organization, targeting businesses that are working to digitize more of their operations.
Silver Lake raised its bid this month after Bain expressed interest in the company. The revised offer represents a 63% premium to Software AG’s closing price on April 20, before the initial investment agreement was announced.
(Updates with context starting in fifth paragraph.)
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