The company could be taken over by Silver Lake.
(Photo: IMAGO/Zoonar)
Dusseldorf, Frankfurt The takeover battle for Software AG is over. Financial investor Bain Capital announced Monday evening that it would sell its block of shares to competitor Silver Lake for EUR 32 per share. Bain thus gave up the plan to buy the SDax group itself and merge it with its Rocket Software holding. “Unfortunately, our efforts were unsuccessful,” said Rocket Software founder Andy Youniss.
This clears the way for a majority takeover for Silver Lake. The technology-focused private equity company has secured a 41 percent stake with the Bain block of shares. A further ten percent could be added via a convertible bond subscribed in 2021, albeit at a significantly higher price. The investor wants to give Software AG, which has been suffering from weak growth for years, new momentum with money and expertise. Silver Lake wants to take Software AG off the stock exchange as soon as possible.
Software AG shares fell Tuesday morning by up to 1.9 percent to €31.66. In the past few weeks, Bain’s announcement that it would offer up to EUR 36 per share has meanwhile pushed the price above the EUR 35 mark.
Shareholders had strongly criticized Software AG at the Annual General Meeting in May for taking the side of Silver Lake so early and clearly and not really examining the alternatives. Software AG prevented Bain from conducting an audit, which Bain had made a requirement for its own bid. Bain did not want to fight the matter hostilely, which is why the investor decided to withdraw.
Among other things, two of the largest Software AG shareholders, the London asset manager Schroders and Harris Associates, had reprimanded the actions of the Software AG board. Many investors also see a conflict of interest with Software AG supervisory board chairman Christian Lucas.
As the company’s highest body, it is required to act in the interests of all shareholders and to obtain the highest price in the event of a sale. However, since Lucas is also a Silver Lake manager, he was also interested in a low purchase price. Software AG points out that Lucas stopped participating in takeover talks after purchasing a 25 percent stake in Software AG from the founder’s foundation.
“The Software AG case is a fatal signal for Germany as a capital market location,” said one investor. The deal shows that you don’t have to stick to the normal rules with the appropriate chutzpah.
Unlike Silver Lake, Bain did not want to keep Software AG as an independent company, but rather merge it with his portfolio company Rocket Software, which also develops business applications.
According to critics, Christian Lucas, who has been in constant contact with Software AG since the convertible bond was subscribed, quickly secured the foundation’s 25 percent stake when he found out about Bain’s plans. In doing so, he had created facts that made it difficult for Bain to begin with.
With the promised offer, Bain forced Silver Lake to improve its own offer of originally 30 euros per share. The announcement also put so much pressure on Silver Lake that the investor eventually waived the 50 percent acceptance threshold. In the end, however, Bain decided against making his own offer. Bain could have taken the route of a special review of Software AG’s resolutions, which the investor ultimately found too tedious.
In order to collect as many shares as possible by the end of the takeover bid on June 28, Silver Lake is now putting pressure on the minority shareholders in a press release: If they do not tender, there is a risk that they could only get a low price for their shares later , especially since liquidity will be very low once the paper has disappeared from the market.
More: Silver Lake initially relinquishes its majority stake in Software AG