BMC Software Soars After Elliott Associates Buys In

Shares of BMC Software, which specializes in enterprise products, soared nearly 10 percent after Elliott Associates, the venerable New York hedge fund, said it had acquired a stake above 5 percent.

By the close, shares of the Houston software company rose $3.52 to $43.92, or 8.7 percent, after earlier touching $44.35, still nearly $12 below their 52-week high.

BMC, in a filing with the U.S. Securities and Exchange Commission said It was advised Elliott would try to take over the company by filing a group of five nominees for the board. In response, BMC declared a so-called poison pill, by issuing each shareholder rights to purchase a preferred share for every share of common stock.

The move is to protect shareholders from coercive and otherwise unfair takeover tactics, BMC said in its filing. The preferred shares would be valued at $180.

We do not believe the Elliott proposal is in the best interests of our stockholders, said BMC CEO Bob Beauchamp. The company hired Morgan Stanley (NYSE: MS) for financial advice and Wachtell, Lipton, Rosen & Katz for legal advice.

BMC is one of the best-regarded enterprise and middleware developers. At Monday's value, its market capitalization is $7.23 billion. Elliott hasn't yet announced the size of its stake to the SEC.

Peer software companies such as Sybase, Hyperion Software and BEA Associates have previously been snapped up by Oracle (Nasdaq: ORCL), the No. 1 database developer; Hewlett-Packard Co. (NYSE: HPQ) and International Business Machines Corp. (NYSE: IBM).

Elliott, one of the oldest hedge funds, has previously acquired stakes in software companies such as Novell and Blue Coat Software before they were acquired.

Last week, BMC reported fourth-quarter net income plunged 42 percent to $70.7 million, or 43 cents a share on flat revenue of $564.7 million.