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Bain, Golden Gate Agree to Buy BMC for $6.9 Billion

*from, May 6, 2013 (To view original article click here.)

Take Away #1: Bain Capital LLC and Golden Gate Capital agreed to acquire BMC Software Inc. (BMC) for $6.9 billion in the third largest private-equity deal of 2013.

Key Facts and Figures:

  • BMC Software Inc. is a struggling technology provider that failed to find a buyer last year.
  • The buyout investors, which also include GIC Special Investments Pte Ltd. and Insight Venture Partners, agreed to pay $46.25 a share in cash, BMC said.
  • That’s a 13% premium over the closing price on March 4, before Bloomberg reported that BMC had drawn renewed take-over interest.


Key Facts and Figures:

  • Elliott Associates LP, is the second-largest shareholder of BMC, a maker of software that manages corporate computer networks.
  • While Elliott was pushing for a higher price, BMC’s struggle to expand in software and services delivered over the Internet made a richer offer unlikely, according to Joel Fishbein of Lazard Capital Markets.
  • “We thought the price was at most going to be $48,” Fishbein said.
  • “They got the lower end because buyers saw the deterioration of the company,” said Fishbein.
  • Shares of BMC were little changed at $45.45 at 1:52 p.m. in New York.
  • The software maker had a market value of about $6.5 billion as of May 3.

Take Away #3: “The deal makes sense given how much cash flow the company can manage from its mainframe operations,” said Kirk Materne, an analyst at Evercore Partners Inc. (EVR) in New York.

Key Facts and Figures:

  • BMC sells software that manages fleets of computer servers and mainframes, configuring new machines and applying updates to older ones.
  • One of BMC’s business units makes software for managing server networks and the other is focused on mainframe products.
  • Bain is paying about nine times BMC’s projected 2014 cash flow, which Materne estimates will be $774 million.
  • Over the past year, there have been about 190 pending or completed acquisitions announced for U.S. providers of enterprise software.
  • Those acquisitions had an average deal value of $157 million and a typical premium of 29%, according to data compiled by Bloomberg.
  • BC attracted renewed interest in March ahead of the expiration of Elliott’s standstill agreement, a person familiar with the situation said at the time.
  • In April, the company said it planned to cut jobs after a review of its operations, without specifying the number of positions to be eliminated.

Take Away #4: Only two private-equity deals announced so far this year are bigger than the proposed BMC transaction.

Key Facts and Figures:

  • The sale of H.J Heinz Co to Warren Buffet’s Berkshire Hathaway Inc. and 3G Capital Inc. was for about $23 billion.
  • The buyout of Dell Inc. (DELL) by co-founder Michael Dell and Silver Lake Management LLC was announced for $24.4 billion.
  • BMC’s agreement with Bain includes a 30-day period to solicit alternative proposals, according to the statement.

Take Away #5: The BMC acquisition would be Bain’s biggest since 2007, when it teamed up with firms including Carlyle Group LP to buy construction supply business HD Supply Holdings Inc. from Home Depot Inc. for $8.5 billion.

Key Facts and Figures:

  • Created nearly three decades ago by Mitt Romney, the losing candidate in the 2012 U.S. presidential race, Boston-based Bain oversees about $70 billion in managed assets, according to its website.
  • The private-equity firm struck its largest deal in 2006 with the $33 billion takeover of hospital operator HCA Inc.
  • Romney retired from Bain in 1999.
  • Morgan Stanley (MS) and Bank of America Corp. are serving as advisers to BMC, while Wachtell, Lipton, Rosen & Katz is providing legal counsel.
  • Credit Suisse Group AG (CS), RBC Capital Markets and Barclays Plc are serving as financial advisers to the buyout group and have agreed to provide debt financing in connection with the transaction.
  • Qatalyst Partners LLC is also advising the buyers.
  • Kirkland & Ellis LLP is serving as legal counsel.

*To view original article from click here.

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