Bain Capital Offers to Buy SoftwareONE
Event
This morning, Bain Capital announced that it has submitted a non-binding offer to acquire SoftwareONE for CHF18.50.
Impact: SLIGHTLY POSITIVE read-throughs for SFTC and CTS
Offer details. Bain's non-binding offer of CHF18.50 represents an ~33% premium to SoftwareONE's closing price on May 31 when the proposal was submitted to the Board and an ~23% premium to yesterday's close. Bain indicated that it has the support of the company's founding shareholders, who own 29.1% of the stock.
In a separate press release this morning, SoftwareONE confirmed it received the offer from Bain but indicated that the Board, excluding Daniel von Stockar who is part of the founding shareholder group and thus recused himself, has reviewed the proposal with its financial and legal advisors and "unanimously agreed that the proposal materially undervalues the company and is not sufficiently substantiated." Accordingly, the Board determined the proposal was not in the best interest of the company and the majority of its shareholders.
Implied valuation still at the bottom-end of the software-focused ITSP group.
The implied valuation multiples of Bain's offer are ~10.5x LTM EBITDA, ~9.9x C23E EBITDA, and ~8.5x C24E EBITDA, which still puts it at the bottom of the software- focused ITSP peer group, with the valuation more in-line with the hardware-centric peer group average (10.4x LTM EBITDA, 8.7x C23E EBITDA, and 7.9x C24E EBITDA).
The implied takeout multiples are below where Softchoice is trading (10.7x LTM EBITDA, 10.6x C23E EBITDA, and 9.6x C24E EBITDA) but at a premium to Converge's current valuation (6.9x LTM EBITDA, 5.8x C23E EBITDA, and 5.2x C24E EBITDA).
Active market consolidation continues. The proposal is another example of the ongoing active M&A activity in the ITSP/VAR market, which remains very fragmented, with both strategic and financial buyers helping consolidate the space.
Recall, Converge just completed its strategic review (with no sale) that was initiated last November following a significant increase in interest in it from third parties. At the same time, Converge has been amongst the most acquisitive ITSPs while SoftwareONE has also been active on the M&A front.