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(© Pedro Nunes/© PEDRO NUNES, ALL RIGHTS RESERVED. Any form of reproduction, is strictly prohibited without written permission of the author.)
(© Pedro Nunes/© PEDRO NUNES, ALL RIGHTS RESERVED. Any form of reproduction, is strictly prohibited without written permission of the author.)

Constellation review ends with no sale Add to ...

Shareholders of one of Canada's tech darlings are breathing easier after the company decided not to seek a buyer.

No, it's not Research In Motion Ltd. . It's Constellation Software , whose shares have been on a tear that's reminiscent of RIM in its heyday.

The software company has been an acquisition machine and it generates huge cash flow. The stock has been an incredible performer, so it was a bit of a shock to some shareholders when the company announced a strategic review last year.

The company has an odd private-public structure, with big private equity firms owning a large percentatge.

The belief was that the big private equity shareholders of Constellation, including Birch Hill and OMERS, wanted the review as a prelude to a sale that would free up their cash (see the story here). Other shareholders, starved for profitable tech plays, were crushed by the idea of a sale.

The review ended Tuesday with a different plan that has shareholders very excited, pushing the stock to a new 52-week high.

Instead of a sale, the plan is to pay a quarterly dividend to help pass along some of the cash to shareholders. However, the expectation is still that Birch Hill or OMERS may seek to unload their stakes in the company to redeploy the cash elsewhere.

"While the strategic review has concluded, we would not be surprised to see at least one of the major shareholders exit its position this year," wrote CIBC analyst Stephanie Price. "We look to the 2012 board slate which we believe would signal the intentions of major shareholders."

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