The Citadel Group Ltd (ASX: CGL) share price is flying today after the software company revealed a proposed takeover bid.
In late afternoon trade, Citadel shares have jumped 39.7% to $5.56 in response to the news.
For those unfamiliar, Citadel is a software and services company that specialises in secure information management in complex environments.
Formed in 2007, its name comes from the idea of being a medieval fortress to defend against invaders. Citadel’s software helps client management make real-time decisions in health, national security, defence, education and other industries.
What’s the deal?
Citadel has entered into a scheme implementation deed with Pacific Group Bidco, an entity owned by funds advised by Pacific Equity Partners (PEP).
PEP is an Australian private equity firm with more than $5 billion of assets under management.
Under the deed, PEP will acquire 100% of the share capital in Citadel by way of a scheme of arrangement for $5.70 per share in cash. A scrip alternative will also be available to shareholders.
The cash consideration represents a 43.2% premium to Citadel’s last closing price of $3.98 and values Citadel at an enterprise value of $503.1 million.
The $5.70 consideration will be reduced to the extent of any special dividend. Citadel noted that if the scheme is implemented, the board intends to declare a fully franked special dividend of up to 15 cents per share on, or shortly before, the implementation date of the scheme. This would enable shareholders to receive up to 6.4 cents per share of additional benefit from franking credits.
Regardless, shareholders will receive the previously declared fully franked final dividend of 6 cents per share on 1 October 2020.
Directors on board
Citadel’s board unanimously recommends that shareholders vote in favour of the scheme. Subject to an independent expert report and in the absence of a superior proposal, each Citadel director intends to vote in favour of the proposed scheme.
The company noted that the scheme involves limited conditionality. The scheme is subject only to conditions customary for transactions of this type, including regulatory, court and shareholder approval, and is not subject to financing or due diligence.
Citadel expects to dispatch the scheme booklet to shareholders in late October. Following this, shareholders will have the opportunity to vote on the scheme in December.
Commenting on the proposal, Citadel chair Peter Leahy AC said: “The Scheme is an attractive transaction which provides an all-cash option for Citadel shareholders. The Citadel Board has unanimously concluded that the Scheme represents a compelling outcome for our shareholders, customers, suppliers, and staff.”
