ISLANDIA, N.Y. (HedgeWorld.com)–Computer Associates International Inc. and Ranger Governance Ltd. have agreed to end their proxy fight over five seats on CA's board of directors.
According to Computer Associates' subsequent filing with the Securities and Exchange Commission, the company has agreed to pay US$10 million to Sam Wyly, founder of Ranger Governance, part of his hedge fund manager Ranger Capital Group. Mr. Wyly has agreed to extend his non-compete agreement with the company through 2007. Computer Associates, Ranger Governance, and Mr. Wyly have also agreed to five-year standstill agreements according to which the two former parties will not engage in further proxy contests with the company during that period.
Ranger and CA jointly announced Wednesday morning that CA will add one independent director to its board. The corporate governance committee will nominate a candidate for that post and the entire board will vote on that nomination, most likely before the end of the calendar year.
"I'm expecting that this (nomination) is going to be a very nice announcement by CA. They've already got a lot of new blood," said Stephen Perkins, president of Ranger Governance.
Mr. Perkins said he believes CA has made great strides in internal reform. "We believe that the company's new independent directors, and its process for identifying new directors–will ensure that the company adheres to its stated principles and that this will benefit the shareholders."
Ranger Governance's near future "is not going to be about CA. We'll be moving forward on other corporate governance issues," he added. "We're probably more familiar with the tech sector than with other sectors," and will probably continue to be most active there. After the close of the market Monday, Computer Associates reported a first-quarter loss and warned that second-quarter results would trail the average analyst forecast. On Tuesday, the price of Computer Associates' stock responded to that announcement, hitting a nine-year low, falling below $8. Mr. Perkins denied the suggestion that this may have pushed talks between the two parties in the proxy battle toward their successful conclusion.
"We were already in dialogue at that point, and one of the points we have in common" with Ranger's management, "is that we want to see the value of this stock go up, not down." The stock price did go back up above $8 after this announcement, although given the broad rally Wednesday it is impossible to credit the agreement for that.
Sam Wyly, founder of Ranger Governance, which is part of his hedge fund manager Ranger Capital Group, said in a statement that he is proud of having played a part in the process of shareholder democracy. "I am confident that CA is on a course to being recognized as the gold standard in good corporate governance. CA's new business model and demonstrable focus on corporate governance should yield good results for all shareholders in the future." He faced an uphill struggle had he not cut this deal. CA's management defeated his proxy efforts last year, and already this spring some important investors, including Walter Haefner, have announced that they would again support management.
In light of this agreement, it appears that the annual shareholders meeting of CA, scheduled for late August, will prove to be a tranquil undramatic gathering.
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