Bain, Golden Gate in the lead to buy BMC Software

Sources say the two firms offered more than arival consortium of KKR & Co, TPG Capital, and Thoma Bravo

A private equity group made up of Bain Capital LLC and Golden Gate Capital Corp has emerged as the lead contender to buy BMC Software Inc for more than $6.5 billion, three people familiar with the matter said on Tuesday.

Bain and Golden Gate, which made a binding bid for the business software maker on April 22, offered more than a rival consortium of KKR & Co LP , TPG Capital LP and Thoma Bravo LLC, the sources said.

The exact bids could not immediately be learned, but one of the sources said the offers came in a range of $45 to $50 per share, valuing the company at more than $6.5 billion.

A deal for BMC Software would represent one of the largest leveraged buyouts so far this year, after Michael Dell teamed up with private equity firm Silver Lake to take Dell Inc private for $24.4 billion earlier this year. Silver Lake accounts for only a quarter of the equity in that deal.

Buoyant debt markets have encouraged private equity to consider larger deals, which in turn call for larger equity checks and make buyout firms more open to teaming up.

BMC Software has not granted exclusivity to Bain and Golden Gate and the rival consortium could still raise its bid, or the business technology company may yet decide not to sell at all, said the sources, who asked not to be identified because the matter is not public. BMC is trying to finalize an agreement in the coming week, one of the people added.

BMC Software, KKR and Thoma Bravo did not respond to requests for comment while TPG, Bain and Golden Gate declined to comment.

BMC Software shares ended trading at $45.58 on Tuesday, giving the company a value of $6.5 billion. It competes with Oracle Corp , SAP AG , CA Inc and Compuware and has been under pressure from Paul Singer's activist hedge fund Elliott Associates LP to sell itself since last year.

Elliott, which has a 9.7% stake in the company, argued that BMC's management was neglecting a huge opportunity to expand into Internet-based business software, a market dominated by the likes of Salesforce.com Inc . The world's largest providers of software for enterprises, including Oracle, SAP and Microsoft , have already begun investing heavily in that market.

Houston, Texas-based BMC is due to announce first-quarter earnings on May 7. Its shares have rallied 14.7% since the start of the year, on expectations of a deal, compared with a 9.5% rise in the NASDAQ.

Rival Compuware Corp , which has rejected a $2.3 billion bid from Elliott, is also exploring a sale and talking to buyout firms to gauge takeover interest, people have previously told Reuters.

Elliott is a seasoned investor in the software sector. It is a shareholder in business software company Attachmate Corp, alongside Golden Gate, Thoma Bravo and Francisco Partners.