Takeover target Alterian's shares slipped 1.25p this morning to 79.75p – 0.25p below the indicative cash offer from SDL which the Bristol-based database marketing software company rejected yesterday.
The £50m offer, worth 80p a share, values the shares at 27 times forecast earnings for the current year and 16 times for next year – this represents a 40% premium to Alterian’s closing share price last Thursday, the day before the offer.
But Alterian, whose shares have lost more than two thirds of their value in the past six months and are well below the 217p level at which they traded a year ago, says the offer seriously undervalues its prospects – despite recording a £4.26m pre-tax loss in April. There has since been a major boardroom clearout and new chief executive Heath Davies is currently executing a business transformation plan.
Alterian says this will see "a new forward-looking focus" and insists it is not investigating an option to sell the business. The company will also publish full details of a previously announced strategic review and its current progress along with its interim results next month.
Panmure Gordon analyst George O’Connor told the Financial Times today that he expected “two years of pain, coupled with a discounted rights issue” under Alterian’s existing operational plan and that a takeover provided a “great opportunity” for its shareholders to exit.
Meanwhile SDL, based in Maidenhead, has a month to make a formal offer to Alterian and Mr O’Connor said there is a possibility it will sweeten its offer. It says there is a strong strategic fit between the two companies. SDL is one of the world’s top three providers of language services delivering translation, localisation, internationalisation, interpretation, content and software development and global information management services to a string of blue chip international companies.
Analyst Alexandra Jarvis at Peel Hunt, told the FT: “This is not an expensive acquisition in the context of previous acquisitions SDL have done but these are quite tough markets and Alterian is in a tough position.”
However, she rated the possibility of a rival bid as “quite low” given Alterian's problems and turnround risks.
