EG shares traded down 12% as the market snapped to the lower valuation proposed by Verint and backed by the EG Board.
Companies: EG Solutions, VERINT SYSTEMS
EG Solutions (LON: EGS) have agreed to a £26m takeover bid by US data giant Verint, which equates to 112.5p per share, a premium of 53% of the average price of 73.5p per EG share for the six months to September 4.
This is, however, a discount of 11.1% to the closing EG Share price of 126.5p on the previous day. As a result, shares have fallen today to trade around 111p per share, close to the Offer price. Usually, acquisitions need to take place at a premium to market value. However, in this case, Management highlights the recent share price rise has been driven by thin volumes and small trades, whereas the price is a 41p premium to what it believes was the last "institutional price".
Verint, who offer customer engagement optimisation and cyber data services, said their takeover offer required approval by 75% of voting EG shareholders, with irrevocable undertakings of 68% of shareholders already received. In other words, this deal is highly likely to go through.
These irrevocable undertakings are made up of Directors with 18% of total shares, the EBT of 7% and 43% of "other" EG shareholders.
Non-Executive Chairman of EG Nigel Payne made the comment that:
"The Offer Price of 112.5 pence per share represents a premium of 85% over the share price of the business just one year ago, a premium of 53% over the last six month's volume weighted average share price and is an attractive exit price when viewed against what we believe was the last institutional price at which EG's shares traded, which was on 23 May 2017 at a price of 71.7 pence, some 40.8 pence (35%) below the Offer Price."
The deal is expected to be finalised in November.
EGS currently trade at a high premium - 35x versus the industry median of 18x. Share prices have tripled this year, bolstered by raised guidance in July.