One of Software AG’s top investors has spoken out against the firm’s planned €2.4 billion ($2.6 billion) takeover by US private equity firm Silver Lake Management, saying the price “materially undervalues” the business.
Justin Hance, a portfolio manager at Harris Associates LP, said he struggles to see why the German software company won’t engage with other buyers and that Silver Lake’s bid of €32 a share is very low. Software AG recently rebuffed a rival bid of at least €34 per share from Bain Capital, choosing to maintain support for the Silver Lake proposal.
“We think the offer materially undervalues the business,” Hance said of the Silver Lake bid in a telephone interview on Monday. “We struggle to understand why the company would not engage with other offers and try to create competition for the asset, even if they think Silver Lake is the best buyer.”
“Not engaging with Bain discourages other buyers,” he said.
Harris Associates held a stake of around 3% in Software AG at the end of April, according to data compiled by Bloomberg, making it a top 20 investor in the company. Shares in Software AG were unchanged at 9:27 a.m. in Frankfurt, giving the company a market value of €2.5 billion.
A representative for Software AG declined to comment beyond a May 9 statement, which said it’s “not in a position to engage” because Bain’s non-binding proposal isn’t superior. The Silver Lake bid is in the “best interest of all of the company’s stakeholders” with a high degree of deal certainty and will keep Software AG as an independent German-headquartered company, it said at the time.
Last week, Schroders Plc, Software AG’s largest outside shareholder, publicly criticized the firm for not engaging with potentially higher offers from other suitors. The UK fund manager said this could be seen as raising potential questions over conflicts of interest and whether the appropriate fiduciary process was being followed.
Chicago-based Harris Associates, which manages about $99 billion, has made several high-profile investments in Europe over the years, including Credit Suisse Group AG, Daimler Truck Holding AG and Glencore Plc.
--With assistance from Eyk Henning.
(Adds shares in fifth paragraph, declined to comment from Software AG in sixth paragraph.)