AMSTERDAM (Reuters) - Advent International offered 1.2 billion euros ($1.6 billion) to take UNIT4 UNI4.AS private, which the Dutch business software firm said would help it speed up expansion without the pressures of being listed on the stock market.
UNIT4 shares jumped more than 8 percent to a high of 38.18 euros on Monday, just short of the 38.75 euro per share cash offer from Advent, a private equity firm that invests in technology and software businesses.
Advent’s offer represents a 32 percent premium to UNIT4’s shares on October 11, before the company said it had been approached by potential buyers.
The Dutch company, which competes with firms such as Germany’s SAP (SAPG.DE) and U.S.-based Oracle Corp (ORCL.N), and Workday Inc WDAY.N, provides cloud computing and other business software services - known as SaaS - for private and public-sector customers.
UNIT4 counts utility EDF Energy (EDF.PA), the City of Oslo and SEUR, the leading express courier firm in Spain and Portugal among its clients, according to its website.
“UNIT4 has the opportunity to become a global leader in mid-market ERP (enterprise resource planning),” Fred Wakeman, Managing Partner of Advent, said in a statement.
The company has more than 4,300 employees in Europe, North America, Asia and Africa, and reported EBITDA (earnings before deduction of interest, taxation, depreciation and amortization) of 86.2 million euros on revenue of 469.8 million euros last year.
UNIT4 said Advent’s offer values it at 18.1 times EBITDA adjusted for capitalized research and development costs and investments in FinancialForce.com, a cloud applications company.
Similar deals in the sector were done at lower multiples of between 11 and 15, said Oppenheimer Managing Director and head of EMEA Technology & Telecoms Investment Banking, Xavier Moreels. Oppenheimer advised UNIT4.
Advent has been investing in technology and software businesses for more than 20 years, and its current portfolio includes KMD, one of Denmark’s largest IT and software companies.
Last month it also acquired U.S.-based P2 Energy Solutions, a provider of software and data to the oil and gas industry.
UNIT4 said it needed more investment to expand its cloud computing and Saas business, a move that would initially hit revenue and profitability and would be easier to carry out away from the stock market where pressure from investors for short-term results would likely hurt its shares.
Companies are increasingly turning to cloud computing - an umbrella term for technology services offered remotely via the Internet instead of on-site - to cut costs and add flexibility to their IT departments.
The billing structure for cloud computing is basically subscription-based, Chris Ouwinga, UNIT4 founder and co-chief executive, told reporters on a conference call.
“That would defer a large part of our revenue and as a result the profitability would be hit in the shorter term, in the first couple of years. In order to make that transition, it is easier to work in a private setting,” he said.
While UNIT4 recommended Advent’s offer to shareholders, it also left the door open to substantially higher offers. But some analysts said a rival bid was unlikely.
“The likelihood for a higher bid is ... small, as there has already been a structured sale process,” said Rabobank analysts Hans Slob and Frank Claassen in a note to clients, describing Advent’s offer as fair.
ING and Oppenheimer are financial advisors to UNIT4, while ABN AMRO is independent financial advisor to UNIT4’s supervisory board, and Goldman Sachs is financial advisor to Advent.
($1 = 0.7421 euros)
Reporting by Sara Webb, additional reporting by Kylie MacLellan in London; Editing by Erica Billingham