Directors at Phoenix IT Group are “unanimously” backing the 160-pence-per-share offer that was formally made by Daisy Group this morning, valuing the entire share capital at close to £135m.
Discussions between LSE-listed Phoenix and the suitor were made public last week, leaving Daisy 28 days to come back to the table with a firm offer or walk away from negotiations.
The cash offer equates to a 24 per cent premium on Phoenix’s share price of 129 pence at the close of trade on 20 May, the last business day prior to confirming interest from B2B mid-market ICT seller Daisy.
“This offer from Daisy is an opportunity for Phoenix shareholders to realise tangible value, now, from their holdings and the Phoenix directors recommend unanimously its acceptance,” said Phoenix non-exec chairman Peter Bertram in a prepared remark.
CEO Steve Vaughan came on board in March 2014 and wrote a multi-year turnaround strategy. Although Phoenix is no longer booking big losses, it has yet to get its revenues growing again.
“Our three-phase plan for Phoenix has the potential to deliver long-term value to shareholders, but as with any plan it is not without risk,” said Vaughan in a statement.
He added the premium offer is “fair recognition of the potential upside in the plan, tempered by the inevitable execution uncertainty. We have worked hard to bring financial clarity to our group”.
The 160p bid is a 21 per cent premium on the average closing price for Phoenix's share price in the last six months, and a 37 per cent premium over the 12 months prior to 20 May.
The offer will be implemented by means of a court-sanctioned scheme of arrangement, under part 26 of the Companies Act.
At the start of this year, Daisy was taken private in an MBO with the backing of then-CEO Matthew Riley, Penta Capital and long-term investor Toscafund, the latter which also owns a 28 per cent stake in Phoenix.
According to Phoenix, shareholders who own nearly 65 per cent of the stock are to vote in favour of the deal at a General Meeting.
As is customary in most acquisitions, Daisy confirmed it will push through operational and administrative restructuring at Phoenix following a "detailed integration review" once the transaction completes.
"It is anticipated that the integration review will identify areas of overlapping corporate, commercial, operational and support functions... decisions will be taken which are likely to involve headcount reduction".
The existing directors will "cease" to remain as directors following the buy-out, it added.
In a statement, Daisy founder and executive chairman Matthew Riley – who moved upstairs when former Computacenter UK MD Neil Muller joined as CEO in February – claimed the acquisition made it the “first truly converged IT and unified communication provider in the UK mid-market”.
This will be the 48th acquisition Riley has made since he formed Freedom Communications in 2001, and the second this year. It will not be his last as he plans to double Daisy’s sales within five years, if all goes according to plan. ®