Business & Real Estate

Ranadive’s software company, Tibco, sold for $4.3 billion

Vivek Ranadive has spent the past year breathing new life into the Sacramento Kings, helping the tired franchise boost ticket sales and corporate sponsorships.

His software company in Palo Alto hasn’t fared as well.

Capping nearly two years of disappointing financial results and a decline in its stock price, Tibco Software Inc. agreed to be sold Monday to a private equity firm for $4.3 billion. The deal will give Ranadive a personal payout of $316.4 million for his share of the company he founded 17 years ago, according to regulatory filings.

An adviser to Ranadive and the Kings, Adam Mendelsohn, said the sale of Tibco “has absolutely no impact” on the team’s operations.

It’s possible, though, that the Kings have had an impact on Tibco. Ranadive has been a hands-on chairman of the team, shuttling by private plane to games and practices in Sacramento while retaining his role as chairman and chief executive of the $1 billion-a-year software company.

As the Kings have been reinvigorated, Tibco profits have fallen in the past two years and sales growth has slowed considerably. While the trouble signs started showing up in Palo Alto before Ranadive took control of the Kings, investment analysts said it’s possible Ranadive’s attention became diverted from Tibco’s operations as he concentrated on the Kings.

“Management certainly appeared to be distracted, for whatever reasons,” said analyst Norman Young of Morningstar Inc. in Chicago. He said Tibco’s problems and Ranadive’s work with the Kings are “not a coincidence.”

Analyst Steve Koenig of Wedbush Securities in San Francisco agreed. “There is ample evidence to say that Vivek was not minding the store, at least not as well as he should have been, with him spending quite a bit of time on his basketball endeavors,” Koenig told Investor’s Business Daily.

Tibco is being sold to Vista Equity Partners, a private investment firm that concentrates on turning around software companies. Vista is paying $24 a share, or $4.3 billion including assumption of Tibco debt. The announcement came just a few weeks after Tibco, with its stock price sagging and a disgruntled shareholder calling for action, announced it was exploring a possible sale.

In a letter to Tibco customers Monday, Ranadive said he will remain the software company’s chairman and chief executive until the deal is completed sometime before the year ends. After the deal wraps up, “in coordination with Vista Equity Partners, I will work out what role makes sense to best help the company,” he said.

In addition to the sale of his shares, Ranadive will collect a $4 million fee for staying on at Tibco while the sale gets sewn up, according to a Securities and Exchange Commission filing.

The sale requires approval of Tibco’s shareholders.

Ranadive led a group of investors that purchased the Kings in May 2013, preventing their relocation to Seattle. Since then, he has overhauled the front office, mended fences with the corporate community and overseen the start of construction on a new $477 million arena at Downtown Plaza.

Tibco forged strong links with the Kings organization. Its software is embedded in the team’s smartphone app. In an SEC filing last March, Tibco said the company provided the Kings with a total of about $400,000 worth of software and services in 2013. In return, the company received signage at Sleep Train Arena and other considerations.

Ranadive said in an interview last year that Tibco’s board of directors signed off on the company’s relationship with the Kings. He also said the smartphone app became a showcase for Tibco, drawing interest from other sports teams.

“Tibco and the innovations Vivek helped create will continue to make the Sacramento Kings the most groundbreaking franchise in sports,” Mendelsohn said.

Besides the new app, Ranadive has brought a high-tech attitude to the Kings. The team incorporated Google Glass into a game broadcast last season, and it was the first major sports organization in North America to accept bitcoin, the controversial online currency, for the purchase of tickets and merchandise.

Ranadive also been highly visible as team chairman. Just last Friday, he participated in media day activities at the Kings’ practice facility, giving interviews about the upcoming NBA season.

David Carter, a sports-business expert at the University of Southern California, said it’s rare for someone to be a corporate CEO “and run point on a franchise at the same time.”

The owner of the NBA’s Memphis Grizzlies, Robert Pera, is chief executive of a publicly traded San Jose telecommunication company, Ubiquiti Networks. But Pera has maintained a comparatively low profile with the Grizzlies, “not anything like Vivek’s out-front position,” said Bay Area sports consultant Andy Dolich, a former Grizzlies executive.

In a news release announcing the Tibco sale, Ranadive said: “As a private company, Tibco will have added flexibility to serve our customers and execute on our long-term strategy. We are excited to work with our new partners at Vista and enter our next chapter of growth and industry leadership.” A Tibco spokeswoman said Ranadive was not doing media interviews Monday.

Ranadive owns 8 percent of the company’s stock. At the $24-a-share takeover price, he would get $316.4 million. Bloomberg business news called the Tibco sale the biggest tech buyout this year, surpassing the $2.5 billion paid for Compuware Corp. earlier this month.

It’s the second big buyout of Ranadive’s career. The first company he founded, Teknekron Software Systems, was sold to Reuters in 1994 for $125 million. He founded Tibco three years later.

Tibco has been a pioneer in what’s known as “big data,” in which companies store and manipulate billions of bits of electronic data to manage inventories and connect with customers. It generates revenue of about $1 billion a year and has a client list including Delta Air Lines, FedEx, the Department of Homeland Security, JPMorgan Chase and others.

“It’s really the backbone for moving information for much of the world,” Ranadive said in an interview last October.

The company’s stumbles began several months before Ranadive jumped into the bidding war for the Kings. Starting with the quarter ending Nov. 30, 2012, profits have declined almost every quarter and once-robust revenue growth has petered out. In the first nine months of the current fiscal year, profits fell to $16.3 million from $39.6 million. Revenue grew less than 1 percent, to $760.8 million.

Young, the investment analyst, said Tibco succeeded in landing big sales contracts with major corporate accounts. But the Morningstar analyst said Tibco struggled to make sales to small businesses, or smaller divisions within big companies, often losing those sales to up-and-coming software companies such as Tableau Software of Seattle.

In the data world, “most of the growth was coming from that side of the business,” Young said.

He added that in recent months, Tibco hired a new president. It appeared to be a sign that Ranadive was “trying to take a couple of steps back from day-to-day management,” Young said.

Tibco’s problems started coming to a head in June. Praesidium Investment Management Co., a New York firm that owns about 3 percent of the company’s shares, released an open letter complaining that Tibco was “falling far short of its significant potential.”

On Sept. 3, the company announced it had hired an investment banking firm and was exploring “strategic and financial alternatives,” which is often code for looking for a buyer.

“Tibco engaged in an extensive process involving a large and diverse group of strategic and financial buyers. Ultimately the board concluded that the sale alternative was the best alternative, and that Vista’s offer to acquire Tibco is the best way to maximize value for our shareholders,” said board member David West in a prepared statement.

The sale price represents a 26 percent premium to Friday’s closing stock price. The price shot up $4.14 to close Monday at $23.65 on the Nasdaq market.

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