Peregrine Systems Inc. sold its Remedy subsidiary to BMC Software Inc., created a new company to handle certain customer affairs, and filed for Chapter 11 protection, the beleaguered San Diego infrastructure management software maker said Sunday.
BMC will pay US$350 million in cash and assume the liabilities for Remedy, which makes customer service and customer support software and has about 6,000 customers worldwide, according to a BMC statement. Peregrine acquired Remedy in mid-2001 in a cash and share deal then valued at $1.08 billion. In May, Peregrine said it had discovered as much as $100 million in accounting irregularities and raised that amount to $250 million last month. The company filed for Chapter 11 protection because of legal and financial issues raised by its inability to file audited financial statements dating back to 2000, it said in a statement.
The sale of Remedy and the Chapter 11 filing represent "a new beginning that will allow a financially stable Peregrine to put the challenges of the past behind it," according to Peregrine Chief Executive Officer Gary Greenfield in the statement.
Peregrine also said it will file suit against Arthur Andersen LLP, Arthur Andersen Germany, Arthur Andersen Worldwide S.C., the Andersen audit partner and other, unnamed defendants, seeking more than $250 million in damages. The lawsuit alleges the accountants committed fraud and breached their accounting duties and responsibilities, Peregrine said.
The Chapter 11 filing includes Peregrine Remedy Inc., the unit that is being sold to BMC, but excludes all other subsidiaries and Peregrine Solutions, a new company that will handle new license and support contracts, Peregrine said. The sale of Remedy is subject to approval by the U.S. Bankruptcy Court for the District of Delaware, the company said.
BMC has agreed to provide Peregrine with up to $110 million in debtor-in-possession (DIP) financing to allow the company to continue business as usual, Peregrine said, adding that its number one priority is to serve its customers. The DIP financing will be repaid from the proceeds of the Remedy sale, Peregrine said.