Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi James and Team, What are your thoughts on the Indicative proposal of $1.58 cash per Nitro share? The Board has rejected the offer. Do you think there will be a higher bid the Board will consider or should we take this increase in share price to sell out. Regards Debbie
Hi Debbie,
Signature and document productivity business NTO delivered a poor update in July including a downgrade of ARR guidance from $US64-68m to $US57-60m, an 11% cut, with the market understandably concerned with the reduction in expected revenue synergies from the Connective acquisition from $US2.5m to just $US1m.
However this week has seen the stock surge ~50% following a takeover bid from Potentia Capital Mgt. at $1.58 – the bid is a non-binding proposal to acquire 100% of the business. This could be the lucky “get out of jail free card” for some investors who ventured late on in the stocks 12-month plunge from $4, however, we ultimately think the bid price is low and the acquirers will make a lot of money if it goes through, the market just has no appetite for loss-making businesses at the moment, whereas private equity can take them behind closed doors, make them profitable and probably bring them back to the market in a few years. Yes, a higher bid is possible here we suspect.
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