Bumpitrage — where activists press would-be acquirers for better deal terms — can be risky. But minority investors in UK software group Aveva, have succeeded in wringing a better buyout offer from Schneider Electric. The French multinational increased its offer by 4 per cent on Friday, valuing Aveva at £9.8bn. Schneider’s offer is now final. Amended terms, not just the higher price, are likely to get holdouts over the line.
Even so investors, including arbitrageurs at hedge fund Davidson Kempner, still have cause to view Schneider’s bid as opportunistic. Even with a 47 per cent premium, the £32.3 per share offer is well below the £42 where shares peaked last year. Earnings multiples suggest a 30 per cent discount to comparable software deals and to Aveva’s past valuation.
Missed earnings and slowing revenues have weighed on shares. So have lower tech valuations. But the derating was overdone. Earnings estimates have only fallen by a tenth since the start of the year. The switch to a “software as a service” (SaaS) model should lead to steadier longer term cash flows, even if associated costs squeeze short-term earnings.
Governance issues further muddy the waters. Aveva’s chief executive is ex-Schneider. Similar overlaps apply to others on the executive team and board.
Schneider, which holds 59 per cent of the shares, needs the support of 75 per cent of minority shareholders for the proposed scheme of arrangement to go through. Davidson Kemper with 3.8 per cent of the shares appeared to have rallied enough support to block it, with just 6.2 per cent more needed.
That outcome is now unlikely. Those unsatisfied with the bump now have another incentive to go along. Schneider also granted itself the option to switch to a takeover offer from a scheme of arrangement. True, it would need 90 per cent of the shares to achieve the same squeeze out. But with 75 per cent of the total, Schneider could choose to delist Aveva instead. Long funds would then feel forced to sell long before arbitrageurs made for the exit.
Aveva/Schneider: bumpitrage yields small victory for minorities Republished from Source https://www.ft.com/content/b563f9ce-38cc-4c06-815a-f1804734b697 via https://www.ft.com/companies/technology?format=rss