Mystery bidder forces Micro Focus to raise offer for Borland

The silent bidding war has pushed Borland Software's price up to $US113M, from $US75M in early May

Micro Focus International raised its offer for Borland Software to $US1.50 per share on Tuesday, up from $US1 in early May, to counter a rival offer from a mystery bidder. It's the second time Micro Focus has had to raise its offer. Another bidder dropped out of the running last month.

The sudden interest in Borland's application lifecycle management tools has almost doubled the company's value in the two months since the bidding war began, with the latest Micro Focus bid valuing it at around $US113 million.

Micro Focus, a U.K. developer of enterprise application modernization and management software, hopes to strengthen its software quality assurance offering with the Borland acquisition, and with the recent purchase of Compuware's application testing and automated software quality business unit. It announced both deals on May 6.

The share price of Borland, a developer of application lifecycle management tools, had languished below $US0.75 prior to the first Micro Focus bid, made on May 5, quickly rising to match the $US1 per share offered.

But on May 22, an unnamed suitor stepped in with an offer of $US1.20 per share. The mystery bidder is referred to only as Company E in Borland's filing with the Securities and Exchange Commission describing the offer. Company E subsequently withdrew its offer on June 15.

Meanwhile, another suitor with whom Borland had been negotiating since last June, referred to as Company A, made an offer of between $US1.10 and $US1.20 per share on June 12.

Micro Focus raised its offer to $US1.15 on June 16, and Company A responded seven days later with a bid of $1.25 per share, according to Borland's SEC filings.

In the latest twist, Micro Focus raised its bid to $US1.50 per share on Tuesday, according to papers filed with the SEC Wednesday. Borland's board is advising shareholders to accept the latest Micro Focus offer.

Borland has lost a lot of weight in order to attract so much attention from the rival suitors. It sold Codegear, the software development tools division that published JBuilder, to Embarcadero Technologies for $30 million in May last year, then in January it lost its CEO Tod Nielsen to VMware, where he became chief operating officer.

Last year it reported a net loss of $US216 million on revenue of $172 million from its remaining application lifecycle management activities.

With Borland on board, Micro Focus will be able to address a broader market, and would gain from access to Borland's customer base, particularly in the U.S., the company said when it made its first bid in May.

Micro Focus also expects to cut costs as a result of synergies in the companies' back-office functions and IT systems.

The Compuware deal, worth $US80 million in cash, was completed on June 1 with the transfer of 300 Compuware employees to Micro Focus.

Micro Focus puts the value of the automated software quality assurance market at over $US2 billion annually.

Based on figures for the year to March 31, the former Compuware business will bring Micro Focus an additional $US74 million slice of that market, alongside the revenues from its existing automated software quality product, Data Express.

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Peter Sayer

IDG News Service
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