Bain Builds Software AG Stake in Challenge to Silver Lake Deal

Bain Capital has built a stake in Software AG, raising the prospect of a takeover battle for the German company, people with knowledge of the matter said.

(Bloomberg) — Bain Capital has built a stake in Software AG, raising the prospect of a takeover battle for the German company, people with knowledge of the matter said.

The private equity firm is seeking talks with Software AG to discuss a potential combination of the Darmstadt-based company with its portfolio company Rocket Software, the people said, asking not to be identified because the information is private.

Software AG and Rocket Software both provide technology solutions to big companies, an area of the market that’s remained relatively robust amid a downturn in the overall technology industry.

Last week, buyout firm Silver Lake Management agreed to acquire Software AG for €30 a share in cash, valuing it at about €2.2 billion ($2.4 billion). Shares of the company have recently been trading above the offer, as investors bet on the possibility of a bump or counteroffer.

To win over Software AG’s stakeholders, a counterbidder would likely have to offer more than Silver Lake and pitch the combination as a better strategic fit. Bain’s deliberations are at an early stage and may not lead to a formal offer, the people said. A representative for Bain declined to comment, while a spokesperson for Software AG didn’t immediately respond to a request for comment.

Any move faces the hurdle that Silver Lake has an agreement to buy 25.1% from the Software AG Foundation and management backing for the offer, which is more than a 50% premium. It’s unclear whether the agreement with the foundation would allow them to sell their shares to a rival suitor bringing a higher bid, an option that’s usually included in such deals.

Rocket Software, based in the Boston area, sells hybrid cloud solutions, computing infrastructure software and other tools for large enterprises. Last month, the company announced the acquisition of Key Resources Inc. to expand its mainframe security offerings.

Bain agreed to buy a majority stake in Rocket Software in 2018.

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