New York, Sept. 23 (Reuters): Troubled software maker Peregrine Systems Inc. on Sunday said it filed for bankruptcy protection and that it plans to sell its coveted Remedy unit to BMC Software Inc. for $ 350 million in cash —less than a third the price Peregrine paid for it.
The company also said it would file a suit for more than $ 1 billion against its former auditor Andersen LLP and related parties whom Peregrine blames for not detecting the problems that led to its bankruptcy.
The bankruptcy filing, in Delaware, was not wholly unexpected. The company has been sinking and investors fleeing since April, when Peregrine said it would delay its quarterly earnings report after replacing Andersen as its auditor. Following that, the San Diego-based software maker said it had incorrectly booked up to $ 100 million in revenue over nearly three years, its top executives quit and the Securities and Exchange Commission launched an investigation.
The accounting mess is behind the law suit Peregrine plans to file against Arthur Andersen Germany, Arthur Andersen Worldwide SC and Daniel Stulac, the audit partner assigned to Peregrine.
“Had they performed their audit responsibilities as the board and independent audit committee believed they were doing, the board could have taken prompt corrective action to deal with the situation in a timely and appropriate manner,” said Gary Greenfield, Peregrine CEO since June.
Andersen, one of the accounting industry’s Big Five firms, was convicted of obstruction of justice in connection with its work at Enron, a relationship that eventually drove it out of business.
Restructuring after bankruptcy
The sale of Remedy Software, which Peregrine bought for $ 1.2 billion in August, is one of several measures the company has taken to reorganise itself. It sold two businesses last month for $ 12.5 million and its business-to-business software unit for $ 35 million in June.
Remedy has been on the BMC’s wish list for years, BMC CEO and president Robert Beauchamp said.
“Over five years ago was the first time I contacted Remedy, back when they were independent,” Beauchamp said. “Then Peregrine bought and took it off the market. When Peregrine ran into their troubles, it came back on the market. We were very excited about the opportunity.”
Peregrine, which still operates its asset management software business, has shed about 50 per cent of its work force to 1,700 employees, including 700 Remedy employees. It sold two businesses last month for $ 12.5 million and its business-to-business software unit for $ 35 million in June.
The bankruptcy filing does not include Peregrine’s international subsidiaries, nor Peregrine Solutions Inc., its customer service unit.
BMC’s $ 350 million purchase of Remedy includes $ 110 million in financing Peregrine will use to continue operating while it reorganises.
The financing gives Peregrine a lower interest rate than it would have found with banks, Greenfield said. For BMC, it virtually assures the Houston-based software maker will be awarded the company following the required bankruptcy auction procedure.
A rival would have to offer a bid that included repayment of the $ 110 million to BMC, said John Cox, BMC chief financial officer.