GIC among investors in $8.5b buyout of US software firm

THE Government of Singapore Investment Corp (GIC) has taken a stake in the third-largest private equity deal of the year.

The investment firm is among a group of investors that will pay US$6.9 billion (S$8.5 billion) in cash to buy American company BMC Software and take it private, according to a statement released by BMC yesterday.

The price per share works out to US$46.25, less than 2 per cent over BMC's closing price of US$45.42 on the Nasdaq exchange last Friday.

A GIC spokesman yesterday confirmed the participation of its private equity arm, GIC Special Investments, in the BMC deal but would not disclose GIC's stake.

The buyout group, led by Bain Capital and Golden Gate Capital, also includes Insight Venture Partners. All three are American private equity firms.

BMC is one of the "big four" makers of business service management software that helps companies simplify their IT processes. The firm has been seeking a buyer since last year, amid intense competition from rivals IBM, Hewlett-Packard and CA Technologies, as well as new cloud-based software providers.

Disappointing growth also prompted one of BMC's largest shareholders, activist investor Elliott Management, to agitate for a sale. Elliott will make a return of about 20 per cent on its initial investment in BMC last year, according to Reuters.

On Monday, BMC said fourth- quarter sales rose 0.7 per cent to US$568.6 million and profit was 87 US cents a share. This was slightly lower than analysts' projections, Bloomberg said.

But the company also appeals to private equity investors. It has stable cash flows and low net debt, presenting plenty of room to increase leverage. "Going private... will enable them to make the changes that were necessary," Lazard Capital Markets analyst Joel Fishbein told Reuters.

BMC chief executive Bob Beauchamp said after the deal was announced that the company, once private, plans to become "a more aggressive competitor".

The BMC deal is the third-biggest private equity deal this year, behind the US$24.4 billion buyout of Dell and the US$23 billion sale of Heinz to Berkshire Hathaway. It is also Bain Capital's largest investment since 2007.

It follows a string of GIC deals this year, including buying stakes in Brazilian infrastructure firm BR Towers and Indonesian retailer Matahari Department Stores.

fiochan@sph.com.sg

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