Nearmap soars on news of attractive takeover offer

Nearmap (ASX: NEA) surged as much as 30.1% to $2.03 this morning after the mapping software company revealed a $1.02bn takeover which represents an 83% premium to its closing price of $1.15 on 5 July when the offer was received and a 39% premium to Nearmap’s closing share price of $1.51 on Friday.

Software investment firm Thoma Bravo - one of the largest private equity firms in the world with more than US$114bn in assets under management (AUM) - has made a non-binding indicative proposal to acquire all the shares at $2.10 cash each.

The offer price also represents a 67% premium to Nearmap’s six-month volume weighted average price of $1.26 to Friday 12 August 2022.

Is this the final offer?

Having already provided Thoma Bravo with non-exclusive due diligence over the last six weeks, Nearmap has now given Thoma Bravo a seven-day exclusivity period for due diligence.

Assuming no binding offer is proposed by Thoma Bravo within that one-week exclusivity period, the board may choose to initiate a full sales process which may bring former [and new] suitors back to the bidding table.

Unearthing value

It’s understood plans by Thoma Bravo to acquire Nearmap have been in the wings for many months after the board deemed recent expressions of interest from other bidders were not in shareholder’s best interest.

Given the limited 'ascribed value' by Australian investors, and the limitations of the Australian capital markets to support global businesses, management also concluded that the company’s real value would be more fully realised once in private hands.

Thoma Bravo is also clearly unperturbed by the lingering legal battle in the US with Eagleview over alleged patent infringement.

Darling status long gone

Management is also well aware the company no longer enjoys the darling status it did with investors when the share price peaked at $4.29 mid-June 2019.

By its own doing, the company also appears to have lost favour with institutional investors, which despite performing well in the crucial US market, remains a loss-maker.

Australian institutional investors have clearly struggled to understand the business after two capital raisings proceeded reassurances it had no plans to raise equity.

Motivated seller

What may also underpin company’s motivation to sell is the undertaking to pay Thoma Bravo an expense reimbursement fee of up to $US3m if an agreement is not reached.

Nearmap has agreed to pay Thoma Bravo an expense reimbursement fee up to a cap of US$3m on the terms attached to this announcement, if during the exclusivity period or within six months after expiry of the exclusivity period:

• A transaction agreement involving Nearmap and Thoma Bravo shall not have been entered into.

• Nearmap entered into a definitive agreement providing for, or shall have or consummated, an alternative transaction.

FY22 update

Ahead of its full year FY22 announcement on Wednesday, 17 August Nearmap guided to:

• Group annual contract value (ACV) portfolio expected to be $159.9m (at constant currency), at the top end of its initial FY22 guidance of $150-$160m, versus $128.2m a year earlier.

• Group cash balance expected to be $93.7m, following utilisation of approximately $20m of capital raise proceeds during FY22.

Nearmap share price over three months.