Germany’s Software AG rebuffed a fresh bid of at least €2.5 billion ($2.7 billion) from Bain Capital, choosing to maintain support for a lower takeover offer from existing backer Silver Lake Management.
Bain said late Tuesday it’s increasing its indicative proposal to €34 per share, with the possibility to go higher under certain conditions. Software AG quickly announced it won’t engage with Bain on the offer, which it believes isn’t superior to Silver Lake’s agreed deal at €32 per share.
Shares of Software AG jumped as much as 2.1% in Wednesday morning trading. They were up 1.9% to €33.74 at 11:55 a.m. in Frankfurt as investors bet on the possibility of a continued bidding war.
Bain said its non-binding bid, which is dependent on due diligence and financing, “would deliver a superior offer to the one currently proposed by Silver Lake in all scenarios.” The buyout firm, which wants to eventually combine its US portfolio company Rocket Software Inc. with Software AG, said a planned tender offer would need only 40% of shareholders to accept.
Deal Certainty
It said Software AG and Rocket Software have complementary products with room for cross-selling, and pledged to make “significant investments” in the company’s employees and technology. Bain also dangled the possibility of boosting the bid to €36 per share if it can secure control of the company, a prospect it won’t be able to achieve without support from Software AG’s biggest shareholder, which has already signed a binding pledge to support Silver Lake.
Silver Lake responded in a statement on Wednesday that said the firm has no intention of selling the 30.1% holding it’s secured in Software AG and won’t partner with another bidder. The firm emphasized that its offer is legally binding and has secured financing in place.
“Silver Lake’s is the only certain offer available to shareholders, and as a friendly one can be implemented without creating multi-month disruption and uncertainty to the company and its stakeholders,” it said.
Software AG said in its Tuesday statement that Silver Lake’s bid is in the “best interest of all of the company’s stakeholders” with a high degree of deal certainty, and “will accelerate the execution of the company’s strategy as an independent German headquartered company.”
Possible Bump
Morgan Stanley analyst Alastair Nolan wrote in a research note Wednesday that it’s “not clear” how Software AG’s management board and takeover committee have assessed the merits of each proposal. It may be difficult for Silver Lake to cross the 50% acceptance threshold if shareholders sense an improved bid is possible, according to Bloomberg Intelligence analyst Tamlin Bason.
“Either Silver Lake will need to raise its offer in response to Bain’s pressure, or Bain and Silver Lake will have to reach a mutual agreement, although this does not appear to be the case at present,” Tradition analyst Gregory Lafitte wrote in a research note.
Bain had earlier made a non-binding bid of €32 per share for Software AG, with the possibility of boosting it to €34 per share if it gains control, Bloomberg News has reported. The German company had also refused to enter talks on that proposal and instead convinced Silver Lake to boost its bid to €32 per share.
Strategic Alignment
Software AG Chief Executive Officer Sanjay Brahmawar said last month that Silver Lake is “aligned” with the company’s strategic direction and it isn’t planning to run a broader sale process.
The tech-focused private equity firm agreed in late 2021 to invest €344 million in Software AG through convertible bonds. Two of Software AG’s six supervisory board seats are filled by Silver Lake representatives, including the chairman position. Software AG has said the takeover offers are being assessed by a committee of independent directors.
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.
--With assistance from Wilfried Eckl-Dorna and Alexandra Muller.
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