Could a rival bid emerge for RPMGlobal?

The sequence of events for RPMGlobal (ASX: RPM) over the past month has been fascinating – a bumper FY25 result drove a 17% share price rally, followed by a takeover offer just two days later.

The FY25 result itself was solid, alongside a better-than-expected FY26 guidance. Some of the key numbers from the result include:

• FY25 revenue up 6% to $76.7 million

• FY25 EBITDA up 32% to $6.2 million

• FY25 software ARR up 16% to $71.8 million (as at 25 August 2025)

• FY25 net profit up 448% to $47.4 million (this figure is inflated due to the divestment of its advisory services business for $63 million)

• FY26 revenue guidance of $88-92 million vs. $89 million consensus (1% beat)

• FY26 adjusted EBITDA guidance of $23-25 million vs. $21 million consensus (14.3% beat at the midpoint)

The price action on the day of the result was incredibly bullish, with the stock opening 6.6% higher and closing up 17.2% at a record $3.88.

A giant caterpillar

Just two days later, the stock entered into a trading halt after an AFR article noted a takeover offer from heavy equipment manufacturer Caterpillar.

The key takeaway from the article was: "It is understood Caterpillar is not the only party to have put in a bid, with at least four parties including Epiroc, a Swedish mining equipment manufacturer, understood to have shown interest at around the $5 per share mark."

On 1 September, RPM announced it received a non-binding, indicative takeover from Caterpillar, priced at $5.00 cash per share, representing a 32.6% premium to its last traded price.

RPM said it ran a "structured process" to assess interest from multiple global strategic buyers, with Caterpillar emerging with an indicative proposal. The two parties are now in the midst of a six-week exclusive confirmatory due diligence process to try to reach final terms.

Food for thought

Discount to offer price: RPM rallied 22.8% to $4.65 the day it announced the takeover proposal. Given the non-binding and indicative nature of the offer, it's understandable that the stock didn't immediately rally to $5.00. Its continued to trade around the $4.60 level, which represents a 7-8% discount to the takeover price.

Interesting timing: The timing of the offer implies potential buyers wanted confirmation of solid FY25 numbers/FY26 guidance before preliminary due diligence. What's also striking is the 32% premium coming after the stock had already rallied 17%. Caterpillar clearly has deep pockets, but the recent run-up means they're paying significantly more than if they'd moved just weeks earlier.

A fairly normal premium: The 32.6% premium itself is a rather vanilla premium, considering recent takeovers like Dropsuite (34% premium), Domain (42% premium), PointsBet (~60% premium) and Insignia (bidding war pushed premium to 57%).

Stocks are surging: Since the trading halt (28 September), equity markets have surged, with benchmarks like the Small Ords and Emerging Companies up ~6% and ~17% respectively.

Software valuations: RPM's valuation (ARR/market cap) sits in the middle of the pack, between established large cap names like Life360 and TechnologyOne, and emerging names like Qoria. At a glance, larger software companies command higher multiples, though at that scale they've typically crossed into profitability and positive cash flow territory.

• RPM: $1 billion market cap, $71.8 million software ARR (as at 25 August 2025) or 13.9x

• Life360: $12.5bn market cap, $416m annualised revenue (as of 2Q25) or 30x

• TechnologyOne: $12.5bn market cap, $511.1m ARR (as at 1H25) or 24.4x

• Energy One: $580m market cap, $60.4m ARR (at end of FY25) or 9.6x

• Qoria: $1.0bn market cap, $145m ARR (at end of FY25) or 6.8x

Putting it all together

The stock is trading at a 7-8% discount to the takeover price, likely reflecting some degree of caution in case the deal unravels and the suitor walks. At the same time, there’s also the chance RPM pushes for a higher price. Given the structured sale process and the six-week exclusivity with Caterpillar, a rival bid appears unlikely, though not entirely out of the question.

From a trading perspective, it boils down to probabilities. For example, if you assume:

• 5% chance the deal collapses (20% downside)

• 80% chance of a deal at $5.00 (8% upside)

• 15% chance of a higher price (let's say 10% plus current 8% discount to a total 18% upside)

You land at a positive expected value of 8.1%.

But adjust the assumptions to something more cautious, say:

• 30% chance of walking away (30% downside)

• 60% chance of a deal (8% upside)

• 10% chance of a higher price (18% upside)

Then the expected value swings to a negative 2.4%.

Whether RPM is an appealing short-term trade, or simply coin toss on deal certainty, it all depends on how you weigh the probabilities. What is clear, however, is that software names and small caps continue to enjoy strong tailwinds. With just one week left in the due diligence period, the market won’t have to wait long to see how this plays out.