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Equity firm criticizes Compuware for inaction

The CEO of Sandell Asset Management Corp., a private equity firm in New York City that owns about 2.5% of Compuware Corp. stock, released a letter to Compuware CEO Bob Paul urging him to put the company up for auction and criticizing him for the company's response to a takeover bid announced last month by New York-based Elliott Management Corp.

Before Elliott's $2.3 billion bid, announced Dec. 17, Thomas Sandell had urged Compuware to sell off parts of the company.

Compuware's Covisint business unit offers health information exchange services to providers and state and regional health information exchange organizations.

"Neither you nor your board seem to have taken our communications seriously. Now, you sit silent in the face of an offer from Elliott Management Corp. to purchase Compuware at $11 per share cash, which you received over a month ago," he wrote.

"As we have stated, we believe a prompt sale of the company would be an effective path to value realization.

"You and your board have not only ignored our suggestions but also have been intentionally dragging your feet on engaging with Elliott. We believe you should immediately initiate a full auction process for Compuware.

"We continue to believe that there are numerous financial and strategic parties, in addition to Elliott, that would be interested in Compuware and that a full auction process would be the most effective way to maximize value."

Sandell's letter follows one to the Compuware board Monday from Jesse Cohn, a portfolio manager for Elliott.

It read, in part: "Over the past several weeks, I have spoken with Mr. (Peter) Karmanos and Mr. Paul regarding Elliott's offer to acquire all of the common stock of Compuware for $11 per share in cash. These conversations were amiable and hopefully productive, but the real key will be whether the board determines to engage with Elliott on our offer in an effort to reach a binding transaction."

Karmanos is one of the company's founders and its chairman.

Cohn wrote that while he waits for an answer, "Compuware's management team should currently be preparing diligence materials so that we may begin our confirmatory diligence review as promptly as possible.

"We have been told the board is taking our offer seriously, and we greatly appreciate that. …We would like to point out that time is of the essence for Compuware. For years, the company's growth and profitability have lagged significantly behind its peers and the market as a whole. Furthermore, historical execution has not lived up to projections made by the company.

"Our offer would provide stockholders with certain, premium value today. However, as each week passes, stockholders are exposed to greater risk as markets can move, the company's performance may continue to deteriorate and macro events may come into play."

Compuware's stock closed Monday at $10.98 and opened Tuesday at $11.06.

"As the company stated previously, the Compuware board of directors is conducting a careful and thorough review of Elliott's proposal, together with independent financial and legal advisers, to determine the course of action that serves the best interests of the company and all of its shareholders," Lisa Elkin, Compuware's senior vice president of marketing and communications, said today.

"The board is assessing Elliott's proposal in the context of the transition we have under way to extend our competitive advantage beyond the mainframe business into higher-margin, higher-growth, market-leading capabilities. The board is committed to responding publicly to Elliott's proposal in a timely manner."

After Elliott's offer, Compuware (Nasdaq: CPWR) hired a New York law firm and two New York investment bankers to advise the board on a response to Elliott's bid.

Compuware will release its quarterly earnings report Jan. 22 for the third quarter of its fiscal year, which ended Dec. 31.

The Compuware board is expected to discuss the Elliott offer Jan. 24. It is not known whether a vote on the offer is scheduled.



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