Stop and ThinkThe folks holding over 80% of RDM's issued shares have the power to accept or decline the takeover offer. Three weeks ago management painted an optomistic picture for the road ahead - Santander finally beginning to contribute, other organic growth anticipated and a couple of competitive bid situations looking good. The share price then, which had not digested the latest dividend increase, was only 13% below the Deluxe bid. Even before the quarterly results were annunced a brokerage firm that follows the company was predicting a near-term share price target of $5.50.
The results conference call may have been intended to make a prospective takeover buyer feel good about the company's prospects or it was simply a shareholder update. Either way the message was clear that further revenue and income growth was anticipated in the near term. This alone could have spurred a further rise in the share price to something above $5, the level at which some believed institutional investment would be attracted.
The Deluxe bid may be the only takeover interest RDM has ever received; after more than 20 years of operation that's a long dry spell so a keenness to accept may be understandable. It may also be a sign that management fatigue or insurmountable barriers to increasing market share and income have set in. In a company that has never been particularly transparent in its communications it's difficult to know but at $5.45 the offer appears to place little value on RDM's future prospects. If that's true, why would Deluxe be keen to buy it and, more importantly, why would management and a few others collectively holding 14% of RDM's shares be willing to sell it?