The Smartgroup Corporation Ltd (ASX: SIQ) share price is soaring after it received a takeover offer.
Smartgroup is a salary packaging business with a market capitalisation of over $1 billion. It also operates fleet management and other employee management services across Australia.
Smartgroup takeover offer
Today Smartgroup announced that it has received a takeover offer of $10.35 per share. The offer comes from a consortium made up by TPG Global and Potentia Capital. If it is to go ahead, the offer price would be reduced by any dividends paid before completion.
At this stage the offer is non-binding and conditional. The Smartgroup board has decided to allow the Consortium to perform due diligence on exclusive terms for the next four weeks. Smartgroup hopes this will lead to an “acceptable” binding agreement.
Offer value compared to share price
The offer of $10.35 per share is 31.7% higher than the closing Smartgroup share price on Tuesday 28 September 2021. This is the last share price before the offer.
the offer is 38.6% above the average share price over the last 90 days to 28 September 2021.
Is the takeover likely to happen?
The board said that it intends to unanimously recommend the takeover, based on the available information. This is subject to an independent expert review and no better offers coming along.
The board also noted that there is no guarantee that this will result in a takeover.
At this time, shareholders don’t need to take any action.
Final thoughts on the Smartgroup share price
Keeping in mind the offer price of $10.35, the Smartgroup share price has risen by over 17% to $9.20 at the time of writing. This means that the offer price is 12.5% higher than the current share price.
It seems the market may not be fully convinced that the offer will go through. A gap of 12.5% sitting on the table is quite high.
If I were a Smartgroup shareholder I would be considering whether it’s worth waiting for the potential 12.5% of gains if the takeover goes ahead, or a better offer comes along. If I had a better ASX share idea, maybe I would consider redeploying the cash now instead.
Of course it is worth keeping in mind that there is no guarantee that the offer will go ahead. On the flip side however, there is always the possibility of another offer from another business, which Ausnet Services Ltd (ASX: AST) recently experienced.
I’m certainly not a buyer now that the takeover offer has been priced into the Smartgroup share price. I’m on the hunt for other ASX share ideas and this is one of my favourite places to get ideas flowing.
