CA Sues to Stop Takeover Bid

Jun 29 2001

NEW YORK – Sam Wyly, the Computer Associates International 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 says 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 referred all calls relating to the proxy fight to public-relations firm Citigate Sard Verbinnen. A spokeswoman said CA will soon release a statement addressing Wyly's comments. No response from the company 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 early next week, McCafferty said during the conference call. He added that Wyly does not intend to countersue 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," McCafferty 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 Aug. 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, former general counsel of Texas Instruments.

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, Fla. George Ellis, former CFO of Sterling Software and an adviser to Ranger, said the group's goal is not to "go out and try to be disruptive" to CA's customers, but rather 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. One key player has already rebuffed him: 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 said.

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 from now until 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 might 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 that his team would boost CA's stock to $60 within three years. Soon after he made that remark, his lawyer immediately rebuked him for running afoul of Securities and Exchange Commission 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."

Shortly after Wyly's conference call, shares of CA were trading up 3.9 percent, at $34.76, on the New York Stock Exchange.