Institutional Shareholder Services (ISS), a proxy voting advisory service, has recommended that the shareholders of Computer Associates International Inc. stock vote for the software company's slate of directors, rather than an opposing slate put up by Sam Wyly's Dallas-based investment firm Ranger Governance Ltd.
Wyly is staging a proxy fight to win control of Islandia, N.Y.-based CA at the vendor's annual shareholders' meeting Aug. 29. If successful, Wyly would replace CA board Chairman Charles Wang and appoint a new management team.
However, Rockville, Md.-based ISS said it doesn't believe that a new board would be in the best interest of the company's shareholders.
"We conclude that shareholders should vote in favor of the incumbent directors, thereby allowing management to continue its ongoing strategy to reposition CA for the future," ISS said in its analysis of the takeover bid.
Patrick McGurn, a spokesman for ISS, said the key issue is a contest for control of CA's board and company. He said ISS looked at whether the plan for moving the company forward presented by Wyly offered more shareholder value and whether Wyly had the experience and skills to bring the plan through to fruition.
"It was a close call, but at the end of the day, [ISS determined] that CA's plan was the way to go," McGurn said.
Owen Blicksilver, a spokesman for CA, said the company is very pleased with ISS's recommendation.
"This reaffirms that CA is on the right track," he said.
In a statement, Sanjay Kumar, CA's president and CEO, said, "Under the leadership of our existing board, CA's management and highly dedicated employees have grown the company to the world's fourth-largest software firm with a market capitalization of over US$18 billion. In the last three years alone, we have generated over $4 billion in cash from operations while returning over $1.5 billion to shareholders in the form of dividends and share repurchases. We look forward to building on our track record to continue to provide shareholder value."
In a statement, Ranger Governance said it was disappointed that ISS endorsed the incumbent board.
"We believe that the board and management of Computer Associates need to change in order to improve the company's performance, culture and growth," Ranger Governance said. "We believe our message of corporate governance, accountable and flexible management, and enhancement of shareholder value is being heard by shareholders."
Valerie O'Connell, an analyst at Boston-based Aberdeen Group Inc., said she hopes ISS's recommendation means the "end to this craziness."
"I've been very outspoken about the lunacy of this bid," she said. "I'm pleased to hear a voice of sanity, and I hope the shareholders listen."