Wyly says CA is suing him to stop takeover bid

Sam Wyly, the Computer Associates (CA) shareholder who is launching a proxy fight in hopes of taking over the company, announced in a conference call Friday that CA has filed suit against him to stop his takeover bid. CA claims that Wyly's bid to replace the company's board of directors and top management is in violation of the non-compete agreement he signed when he sold Sterling Software International to CA in 2000, he said.

CA confirmed late Friday that it had filed the lawsuit.

"While we look forward to making our case directly to our shareholders, we cannot ignore Mr. Wyly's false and misleading statements and we intend to hold him legally accountable. Furthermore, we believe he has violated a non-compete agreement he signed when he sold Sterling to CA," the company said in a statement. No further comment from CA was immediately available.

The lawsuit was filed earlier this week in the U. S. District Court for the Eastern District of New York, said Wyly's lawyer, John McCafferty of Jones, Day, Reavis & Pogue. Wyly intends to respond to the suit at the beginning of next week, McCafferty said during the conference call. Wyly does not intend to countersue, according to McCafferty, and will merely respond to the charges.

"At present, we do not consider the issues raised to represent serious challenges, and do not see that they will involve serious expenditures," he said.

Wyly professed indignation over what he termed CA's "legal maneuvering to try to block shareholders from getting a choice."

"Hey, I'm trying to get hired," Wyly said. "I'm looking for a job at the company. I'm not competing with Computer Associates. I'm competing with (CA founder and Chairman) Charles Wang. He seems to have forgotten that he and the company are not the same."

The ostensible purpose of Wyly's conference call was to introduce two additions to the slate of nominees that Wyly's company, Ranger Governance, is proposing as a replacement for CA's current board of directors. CA's entire board is up for re-election this summer. In order to win the proxy fight, Wyly's proposed board members must be elected by the majority of shareholders participating in a vote at CA's annual shareholder meeting on August 29.

Earlier this week, CA expanded its board of directors to 10 members, adding Lewis Ranieri, founder of Hyperion Partners and chairman of Ranieri & Co. -- a pair of private investment firms -- and Linus Cheung, deputy chairman of Pacific Century CyberWorks. On Friday, Ranger followed suit and added two candidates to its list of nominees: Dennis Crumpler, founder of XcelleNet, and Richard Agnich, formerly general counsel of Texas Instruments Inc.

Participants in Ranger's attempted coup d'etat said during the call that they will be at CA's upcoming CA World 2001 user conference, which begins July 8 in Orlando. George Ellis, former chief financial officer (CFO) of Sterling Software and an advisor to Ranger, said the group's goal is not to "go out and try to be disruptive" to CA's customers, but that it will have a "presence and awareness" at the trade show.

"We'll have our message there through various avenues," Ellis said.

Wyly declined to state specifically how many shareholders have pledged support to his cause. He has already been rebuffed by one key player: Swiss investor Walter Haefner, who with 21 percent ownership of CA is the company's largest shareholder. Haefner has thrown his support behind CA's current management, both Wyly and CA say.

That's not a critical problem, according to Wyly. "It's very winnable without Walter Haefner," he said. "We went through all those calculations."

Wyly and Ellis will be on the road continuously between now and the shareholder vote, wooing institutional shareholders, Ellis said. Neither would discuss whether they've won over any of the large accounts they'll need for their fight to succeed, but Wyly hinted that news may be forthcoming on that front.

"We're not disclosing names ... (but) I think they'll be surfacing in the coming weeks," he said.

Wyly also admitted that he erred earlier this week in claiming his team would boost CA's stock to US$60 within three years. Soon after he made that remark, his lawyer immediately rebuked him for running afoul of U.S. Securities and Exchange Commission (SEC) rules strictly limiting the projections that can be made about stock valuations.

"Any (projections) I have made I hereby retract," Wyly said. "I will say this: I am convinced that if you leave the incumbents in, the (stock) values are going to shrink in the next three years."

Shares of CA (CA) ended trading on Friday up 7.6 percent, at $36.00, on the New York Stock Exchange.

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