Technology

Infomedia receives yet another takeover bid: More are likely

Mon 20 Jun 22, 11:48am (AEST)
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Key Points

  • Infomedia has received a third takeover offer from US-based Solera
  • Management believes it is in the interests of shareholders to engage further with all three bidders
  • A fourth offer is also expected by US private equity firm Genstar Capital-owned auto software business OEConnection

Infomedia (ASX: IFM) continued the gains it experienced late May, up 7.38% at the open, after this morning announcing a third takeover offer has been made.

The share price recently jumped 5% on the back of news that the software-as-a-service (SaaS) provider for the automotive industry had received a competing takeover proposal to the initial $1.70 per share offer from TA Associates and Viburnum.

In the wake of the recent second offer by US-based, global technology-focused investment firm, Battery Ventures, at $1.75 per share in cash, the company today announced a further ‘conditional non-binding indicative’ proposal from Solera to acquire 100% the midcap company for $1.70 per share payable in cash.

Solera is a portfolio company of US based Vista Equity Partners, a technology focussed investment firm.

What we know so far

Mid May Infomedia’s share price closed 28.9% higher on the news that a Boston-based TA Associates/Perth-based funds manager Viburnum consortium offered to acquire the company at $1.70 share, after becoming a new substantial shareholder with a 14.5% stake.

The consortium’s offer came as a welcome relief to the share price which had bounced from $1.79 early October 2021 to $1.19 11 May 2022.

The consortium’s bid valued Infomedia at 20.1 times the last 12 months’ cash earnings. For added context, the most comparable deal in the sector, Brookfield’s recent acquisition of CDK, was at 14.6 times.

All three deals are on the table

Battery Ventures expects to finance its takeover from committed capital within its existing investment funds, and with 375.76m Infomedia shares outstanding, that equate to around $657.6m.

Infomedia's management believes it is in the interests of shareholders to engage further with the TA Consortium, Battery and Solera in regard to their respective proposals, and has granted due diligence access to the three parties.

Infomedia does not intend to make any further announcements until a recommended offer is agreed and has advised the market there is no certainty that any of the indicative proposals will result in a transaction.

Is Infomedia taking these bids seriously?

The pace at which Infomedia appears to be advancing its due diligence on all three bids suggests management is fully aware that a bidding war will ensue before the best all-round deal finally surfaces.

A fourth offer may also surface from US private equity firm Genstar Capital-owned auto software business OEConnection, which has allegedly been circling the company for some time.

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Infomedia share price over 12 months.

What brokers think

For the uninitiated, Infomedia delivers services to the automotive industry across 183 countries.

The company is expected to deliver revenue of between $119m and $123m in FY22 - up from $94.7m in FY21 - and a net profit of $15.97m.

The Infomedia share price is down -2.30% for the year, and prior to the initial offer (13 May) was trading to $1.165.

Consensus on Infomedia is Moderate Buy.

Based on Morningstar’s fair value of $2.07 the stock appears to be undervalued.

Despite recent contract losses, UBS believes the company continues to benefit from strong top-line growth and operating leverage.

Having concluded that the medium-term outlook is positive – with the company offering a FY23 to FY26 compound annual growth rate (CAGR) of 23% - the broker retains a Buy rating and target price of $2.15.

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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