Monday, 13 October 2008

Constellation makes cheeky bid for Gladstone

Gladstone (GLD) – suppliers of leisure centre systems to both local authorities and commercial operators – is today on the receiving end of a cheeky 25p bid from its majority shareholder, Constellation Software (a Canadian company listed on the Toronto Stock Exchange).

Constellation Software Inc. said it will make a 25 pence per share cash offer for the shares of Gladstone Plc. it does not already own, valuing the company at about £13.54 million. Constellation says that the offer for the approx 71% of shares it doesn’t already own represents a premium of about 33.3 percent to the closing price of 18.75 pence per Gladstone share on Oct. 10.

This should come as no real surprise for regular readers as my blog item
After Anite and IBS – where’s the next big acquisition last month flagged Gladstone as one of the candidates for acquisition. I guess we’re all surprised at the timing with the current financial crises, but full marks to Constellation on timing their move when the market is well down (GLD were trading around 22p only a few days ago). I also understand that Gladstone’s CEO, Dr Said Ziai is currently in Australia.

Will it succeed? In my opinion, the offer doesn’t over-value the company which in its last reported financial year had a turnover of £9.2 million and net assets of £12.8 million (and an operating profit of £1.66 million). In addition, I’m guessing that GLD has around 12p of net cash (there was £4M in cash on the balance sheet at 29 Feb 2008), and around 8% of its own shares in treasury.

Unless there is a counter-bid, In the current financial environment I think that the bid could succeed – yes – I think there could be a counter-bid (I can think of at least two prospective bidders that could be running their slide-rules over GLD right now) – but have they got easy access to the cash? If so, then my guess is that 30p might win, but that 35p will be the take-out bid – but then Constellation do have c29% of the shares already.......

P.S. I am a shareholder in Gladstone myself.

No comments: