BMC Software Monday adopted a defensive poison pill to ward off Elliott Associates and its sister firm Elliott International, which have acquired 5.5% of its stock and want BMC to form a special committee to chase a sale of the company.
Elliott, you will remember, is the activist hedge fund that pushed Novell into the arms of Attachmate.
BMC said Elliott's proposal is not in the best interests of other shareholders.
In a letter to the board Tuesday, Elliott Management said BMC's future will be increasingly difficult as a standalone public company; it's suffering from sluggish growth, underperformance on its business plan and substantial execution challenges - it's changed its sales chief four times since 2010; it's been written off as a "growth-impaired legacy asset" with a low stock price; it lacks revenue-scale compared to its major competitors, IBM, HP and even CA; it's late to SaaS and the cloud; and it's facing new rivals eager to carve up its territory.
Elliott has named five candidates it wants to see on the BMC board in anticipation of a proxy fight. In a word they're pips.
They include former HP sales, marketing and strategy chief Thomas Hogan; former Hitachi Data Systems CEO and former HP Enterprise Servers, Storage and Networking Group head David Roberson; the former head of Siemens Global Enterprise Communications Business who also ran HP's outsourcing, consulting and professional services business in the Americas Andreas Mattes; former Salesforce CEO and now CEO of Engine Yard John Dillon; and Infor founder and chairman Carl James Schaper.
The poison pill will be activated if Elliott or somebody else acquires 10% of BMC, diluting the shares of any shareholder attempting a hostile takeover.
However, blood may already be in the water. Corvex Management LP, whose founder according to Reuters used to work for Carl Icahn, has also taken a ~1% position in BMC and appears to be siding with Elliott.
Elliott says it believed BMC "is currently attractive to multiple strategic acquirers" suggesting private equity. And Wall Street came up with vendor names like Oracle, Dell, HP and Cisco as possibilities although BMC now has a somewhat daunting market cap of $7.18 billion. Its Q4 earnings, released last week, were down 42% on flat or declining sales, with the company guiding to single-digit organic growth.
BMC's shares rose close to 9% Monday to $43.92 on the Elliott news and gained a bit more Tuesday.