The billion-dollar takeover offers to Software AG's shareholders dominated the mood at the Annual General Meeting in Darmstadt on Wednesday – and it was quite aggressive at times. The institutional representatives, especially of small shareholders, were concerned with openness and transparency in a bidding war that could last longer; they were concerned with clarity in recent board decisions; about the long-term paths taken by the German IT company; and, above all, they were concerned with money.

Stephan Finsterbusch

Editor in business.

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This is because the Executive Board and a Takeover Committee formed by the Supervisory Board are still in favour of a takeover bid by US technology investor Silver Lake. However, at 32 euros so far, this offer is below the competing offer of at least 34 euros from competitor Rocket Software, which is backed by the financially strong shareholder Bain Capital. "Please explain to us how such a recommendation can come about," asked Martin Weimann from Berlin, who says he represents the interests of several shareholders.

"What must not happen is that Software AG is plundered," Andreas Schmitt of the Schutzgemeinschaft der Kapitalanleger (SdK) shouted into the well-attended hall. Christian Strenger, a professor at the Frankfurt School of Finance and Management, who, in his own words, spoke on behalf of "substantial shareholders", said with a view to the podium that the preference for the lower offer was at least in need of explanation. If these explanations failed to materialize or were unsatisfactory, he announced further steps: "If necessary, we cannot spare you a special audit," he says.

"The shareholders decide, not you"

There is no official offer for Software AG yet. However, small shareholders criticized the fact that the board of directors and the takeover committee of the supervisory board had spoken out very early and clearly in favor of the offer of the financial investor Silver Lake. Bain wants to put more money on the table and also take a look at the books. However, the board has so far refused to do so. "However, there is a duty of neutrality," Weimann addressed the board. "You have to give Bain a fair chance. It's the shareholders who decide, not you – you're just their trustees. You need to identify the best deal for all shareholders" – and not just a select few. Schmidt of the SdK also referred to this and asked: "Why was Bain's last offer rejected so quickly?"

In their response, the Management Board and Supervisory Board pointed out that they had examined all offers in detail and, after extensive consultations, had made their recommendations – and this was in favor of Silver Lake. Almost a year and a half ago, the technology and financial investor subscribed to a convertible bond of Software AG for around 350 million euros, then filled two positions including chairmanship of the supervisory board and in mid-April made its interest including an offer of 2.4 billion euros to take over the entire company. In the event of a successful takeover, the Darmstadt-based IT company will be taken off the stock exchange and repositioned. The current management should remain in office, the headquarters should remain in Darmstadt.

Votes against discharge

Since there will be no vote on a takeover at the Annual General Meeting, shareholder representatives announced that they would vote against the discharge of the Management Board and Supervisory Board. Shouts of bravo rang out in the hall. The absence of the Chairman of the Supervisory Board, Christian Lucas, was also met with widespread criticism from several shareholders. As one of Silver Lake's senior managers and Chairman of the Supervisory Board of Software AG, he plays a central role in the current situation. Therefore, he should have appeared at the Annual General Meeting and answered questions – but he did not. "This is a disrespect for shareholders," said Professor Strenger. Software AG did not want to provide any further information on the reasons for the absence.

Earlier, CEO Sanjay Brahmawar had once again backed Silver Lake's offer in his speech. "The offer is in the best interest of all shareholders," he said. Brahmawar does not consider Bain's counter-offer, which is described as non-binding, to be better and binding. As the panel later explained, this is also the reason why Bain and Rocket Software have not yet gained deeper insights into Software AG's books (due diligence).

Brahmawar said Silver Lake's offer should be formally presented to shareholders in the coming days. Subsequently, the price associated with the offer will also be checked by external consultants. Through a binding agreement with the previous main shareholder, the foundation of the company's founder Peter Schnell, as well as share purchases via the stock exchange, Silver Lake has already secured 30 percent of the shares. Bain comes to around 10 percent through Rocket Software and various financial instruments. Institutional investors such as Schroders and Harris Associates, both of which together hold 7 percent of Software AG's shares, are also in favor of at least more in-depth scrutiny of Bain's and Rocket's offer, respectively, like many small shareholders.