Bidding war emerges for SMS Management and Technology
Australian IT services provider ASG Group has thrown its hat in the ring to potentially acquire SMS Management and Technology, which also received an offer from DWS in late February.
Shareholders are due to vote on the DWS bid, which valued the company at about $113.7 million, on June 14.
The company received an unsolicited, non-binding, conditional expression of interest from ASG Group on Friday to potentially acquire all SMS shares for $1.80 in cash per share, valuing the company at almost $124 million.
In a statement to the ASX, SMS said it had engaged with the company and believed it was reasonable to expect a superior proposal to be made from ASG.
“The SMS board is committed to acting in the best interests of SMS shareholders and therefore will engage with ASG, subject to the negotiation of an appropriate confidentiality agreement,” SMS said in a statement.
“There is no certainty that an offer for SMS from ASG will eventuate. The SMS board continues to believe that the proposed acquisition by DWS by scheme of arrangement is in the best interests of SMS shareholders.”
Melbourne-based IT services provider DWS has offered SMS $1 in cash and 0.39 shares for each SMS share, totalling a value of $1.66 a share.
At the time the offer was made, it came at a 30 per cent premium to SMS’ closing price of $1.28 on February 22. On the back of the expression of interest from ASG Group, SMS was trading up 4.1 per cent on Monday morning at $1.76.
The likely rival bid from ASG comes after it was acquired by Japanese think tank and systems integrator Nomura Research Institute for almost $350 million in December last year.
ASG was founded in the mid-1990s by Geoff Lewis, who has led the company for more than 20 years and is also on the board of the North Melbourne Football Club.
The acquisition offers for SMS follow a rough patch for the business thanks to a 2015 restructure which resulted in its sales pipeline collapsing.
This led to its share price decline from about $3.73 in February 2015 to only $1.28 prior to the DWS acquisition offer, a fall of more than 65 per cent.
In February SMS released its half-year results for 2017, revealing its revenue had fallen 10 per cent on the previous corresponding period to $151.9 million and its net profit after tax, excluding significant items, was $2.8 million, down 61 per cent on the previous corresponding period.
When the company included a non-cash impairment of $46.7 million relating to the writedown of goodwill on its SMS Consulting business, the company fell to a $44.5 million loss.
“The SMS Consulting business is taking longer to turn around than we had anticipated. Having said that, we have made good progress with a number of operational priorities including uplifting our sales capability … and broadening our client base,” SMS chief executive Rick Rostolis said when the company’s half-year results were released.
“Twenty-seventeen is a critical re-set year for SMS. Whilst financial performance is not at acceptable levels, we have taken a number of positive steps in the last six months to stabilise the business and re-position it for growth.”