Acquisitive B2B tech and comms player Daisy Group has bid 160 pence per share for LSE-listed Phoenix IT Group valuing the services operation at around £133m.
Talk of a deal has rumbled along for more than a year but with Phoenix in the middle of a three-year turnaround plan under the latest CEO and no longer reporting steep losses, a rising market cap was thought to be a potential stumbling block. Obviously not.
In a statement to the stock market, Phoenix confirmed it is “advanced discussions” with Daisy “regarding a possible recommended cash offer for the entire issued, and to be issued share capital of the company at a price of 160 pence per share”.
It added that Daisy has completed due diligence and is “well advanced with the finalisation of the necessary financing arrangements”, and the board at Phoenix is “willing” to recommend the deal to shareholders.
This gives Phoenix an equity value of £133m, but this does not include the debts owed by Phoenix, which would take the agreement to £179m, according to analysts.
This 160 pence offer repesents a premium of 24 per cent on last night's closing share price of 129 pence.
In line with stock market regs, Daisy must either confirm its intention to make an offer or not for Phoenix by 18 June, the 28th day following today’s statement.
“The board of Phoenix has indicated to Daisy that it is willing to recommend the key financial terms of the possible offer to Phoenix’s shareholders, subject to finalising the other terms and conditions”.
The public offer caused a 19 per cent bounce in Phoenix’s share price, giving it a market cap of £127.45m. The business is preparing to push out fiscal ’15 numbers early next month.
The business endured some tough times in recent years what with falling sales, deep losses, an accounting probe, botched redundancy programmes and restructuring and being stripped of its Gold partner badge by Cisco for flouting Ts&CS.
As for Daisy, it was pulled off AIM in January following a management buy-out by chairman Matthew Riley, backed by several private equity firms. The plan is to double the business inside a five years — as of March ’14, the company had revenues of a little over £350m.
The company has already acquired unified comms specialist Damovo, as we exclusively revealed.
The business is understood to be planning to make one large acquisition this year and Phoenix would certainly represent a big deal — Phoenix is expected to report sales of £218.1m when it files audited numbers on 8 June.
Megabuyte parnter and principal analyst Philip Carse described the offer as a "bold but also potentially transformative deal for Daisy", estimating the combined revenues for the pair will be £620m.
"This is the biggest UK example to date of the convergence of telecoms and IT that is being driven by cloud adoption and the move to IP networks," he said. ®