Software AG shares fell after the German company refused to enter talks with a rival bidder and said it’s supporting an increased €2.4 billion ($2.6 billion) offer from existing backer Silver Lake Management.
(Bloomberg) — Software AG shares fell after the German company refused to enter talks with a rival bidder and said it’s supporting an increased €2.4 billion ($2.6 billion) offer from existing backer Silver Lake Management.
The stock dropped as much as 5.6% on Friday, the biggest intraday decline in more than three months. It was down 4.9% to €33.50 at 12:58 p.m. in Frankfurt.
Software AG said late Thursday it will support an increased offer from Silver Lake of €32 per share, up from an earlier agreed bid of €30 per share. It negotiated the higher price after receiving a preliminary, non-binding offer from a US software rival it didn’t name.
Bain Capital’s portfolio company Rocket Software Inc. proposed an offer of €32 per share without a requirement to gain control of Software AG, people with knowledge of the matter said. The Boston-based buyout firm was willing to increase the bid to €34 per share contingent on securing control through a so-called domination agreement, a move that would require it to hold at least 75%, they said.
Securing that amount would be difficult, given Silver Lake has already locked in 30% of the company by reaching a deal with Software AG’s biggest shareholder and buying shares from other investors. Bain would need control to pave the way for a combination with Rocket Software.
Board Seats
Software AG yesterday said it won’t enter discussions with the rival bidder, whose proposal was subject to unspecified conditions “that were not achievable,” according to the statement. Software AG highlighted Silver Lake’s pledge to retain the firm’s independence and headquarters in Darmstadt, Germany.
Two of Software AG’s six supervisory board seats are filled by Silver Lake representatives, including the chairman position. The tech-focused private equity firm agreed in late 2021 to invest €344 million in Software AG through convertible bonds maturing in 2027 that will translate into about a 10% stake. Software AG said in the statement that the Silver Lake representatives recused themselves from the assessment of the offer, which was led by a committee of independent directors.
Silver Lake’s bid has the highest chance of success, according to Oddo analysts. Still, some shareholders may push the buyout firm to increase its bid in order to secure a large enough stake to delist the company, Tradition analyst Gregory Lafitte wrote in a research note Friday.
Teaming Up?
“The situation raises the possibility that Software AG could end up like German online pet-food retailer Zooplus AG, which was sold to Hellman & Friedman and EQT AB in 2021 after the two buyout firms lobbed competing bid,” Lafitte wrote. “On the other hand, Bain Capital could potentially team up with Silver Lake or seek to convince the firm to sell its holdings.”
Bain first signaled interest in Software AG earlier this year before Silver Lake’s offer became public, the people said. Its Rocket Software arm has built up a 10% position in Software AG, it disclosed in a filing released Saturday.
Software AG Chief Executive Officer Sanjay Brahmawar last week said Silver Lake is “aligned” with the company’s strategic direction and it isn’t planning to run a broader sale process.
Silver Lake has already agreed to buy a 25% stake in the German company from the Software AG Foundation. The terms of that deal don’t allow the foundation to sell its stake to anyone else, even if a higher offer emerges.
Representatives for Bain and Software AG declined to comment.
–With assistance from Alexandra Muller.
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