MSC.Software Corp. has put off one takeover bid but could be in play nevertheless.
The Santa Ana maker of industrial design software struck a deal earlier this month with ValueAct Partners LP, a San Francisco hedge fund that in September offered $275 million to take the company private.
The deal gives MSC time to complete a yearlong financial review related to options and sales at an Asian unit.
ValueAct could make another offer for the company three months after MSC again starts filing financial statements with the Securities and Exchange Commission, something it hasn’t done for most of this year.
MSC started an internal audit of its financial statements in March after shareholders complained that an executive’s severance package wasn’t disclosed.
Then the review was expanded to include what the company counts as revenue.
ValueAct, a big investor in Martha Stewart Living Omnimedia Inc., targets companies going through accounting woes. When MSC said it was widening its audit probe in August, ValueAct swooped in, buying a million shares at a 52-week low.
As of last week, ValueAct’s initial MSC investment was up more than 60%.
Buying MSC now probably isn’t as enticing for ValueAct, given the stock’s rebound. But that doesn’t mean somebody else might want the company,putting ValueAct in a position to reap any premium a buyer might offer.
“There is that potential,” said Jason Cable, an analyst with B. Riley & Co.
Others that might be interested: Dassault Syst & #269;mes SA, IBM Corp. and Ansys Inc.
Another analyst, Dave Schappel of Keybanc Capital Markets, said he doesn’t see it.
“It’s just not going to happen,” Schappel said. “It’s highly specialized software. So it’s not like IBM would want them.”
MSC’s software helps manufacturers design products. Automakers, aerospace companies and others use the software to test how their products work in the real world.
Despite its troubles, Schappel said he likes MSC. He recently upgraded MSC to “buy” from “hold” after a meeting he had with MSC’s new chief financial officer, John Laskey.
Schappel said Laskey told him MSC and ValueAct “don’t have a confrontational relationship.”
“In other words, people felt free to pick up the phone and call each other,” Schappel said. “From what I’ve heard from other people, that’s indeed what is happening.”
ValueAct started taking an interest in MSC in the fall. In October, the firm told MSC it had bought 6.3% of MSC shares and that it wanted to purchase the rest for $9.
MSC refused the offer.
ValueAct since has upped its stake to more than 11% of MSC’s shares, making it the company’s largest investor.
As part of MSC’s deal with ValueAct, the company added two directors to its board. Interestingly, both newcomers have backgrounds in deals.
One is ValueAct partner Gregory P. Spivy, who engineered the buys of several publicly traded companies for other Bay area investment firms.
The other is William Weyand, who sold Ohio’s Structural Dynamics Research Corp. to Dallas-based Electronics Data Systems Corp. in 2001.
MSC spokesman Todd Evans said the company is “excited” about the board additions.
“They bring a lot of industry expertise,” he said.
Analyst Cable said he sees the hiring of financial chief Laskey as a positive.
“This company has gone through a series of poor acquisitions and earnings misses,” he said. “They’ve struggled to improve their forecasting their financial reporting.”
Those kinds of issues led to the departure of former financial chief Louis Greco in September.
