Wednesday, April 24, 2013

Sold BMC Software

I sold my position in BMC Software, Inc. (Ticker: BMC) today at $44.65 generating a net gain of 1.79% over a 3 day period. I didn’t like the price action and the “sources” have mentioned that the bids by the private equity firms aren’t much higher than the current price. There is a potential that the company may decide not to sell itself if the PE firms don’t increase their bids. I would lean towards a deal happening, but I don’t like the risk reward here.


At April 25, 2013, Anonymous Anonymous said...


Granted there is more uncertainty here with a BMC deal versus LIFE. My confidence level is not as high as it was with LIFE. I think yesterdays price action was positioning for a deal when I look at the options activity. With PE only bidders this creates a true risk arbitrage event. Here is some text that may add some color to what is going on behind the scenes. I am glad you made some money in the short run.

The board of BMC Software (BMC) is scheduled to meet tomorrow to discuss competing offers from two private equity consortia — one fronted by KKR and the other spearheaded by Bain Capital. That news was broken yesterday by Bloomberg News and this news service followed up last night by reporting that after a number of flirtations over the years, BMC’s board may finally be ready to sell. The most recent of those flirtations took place last October, but that strategic review ended with a big buyback rather than a sale. However, the company reported disappointing 3Q earnings in January and shortly thereafter, reports surfaced that buyers were once again sniffing around. That brings us to last night's story by Dealreporter, which indicated BMC’s board is now feeling some pressure to sell. Surely, some of that pressure is being brought by Elliott Management, which owns 9.6% of BMC’s stock and just watched its standstill agreement with the company expire. With the prospects of a sale on the rise, the big remaining questions are “price” and where Elliott will redeploy its proceeds.




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