Monday, 3 November 2008

The battle for Gladstone hots up

Canadian firm Constellation has posted its offer document for the 71% of shares that it currently doesn’t own. Not surprisingly, Constellation has heated up the likely war of words over the next few weeks quoting the following benefits of their bid to Gladstone’s shareholders:

· Provides a cash alternative for shareholders compared to an uncertain future under the current Gladstone Board
· Provides the Gladstone business and employees with an attractive future as part of the Constellation group, which is focused on developing vertical market software businesses
· Constellation believes that Gladstone's existing management are not developing the business to its full potential

Leisure systems provider Gladstone has again rejected the unsolicited approach worth £13.54m from Canadian firm Constellation Software (see
here for RNS). Stressing that the Board “UNANIMOUSLY rejects the Offer” (their capitals) it states that:

· It believes the Offer undervalues the Company and its future growth potential.
· The timing of the Offer is opportunistic
· The Offer terms fail to take account of Gladstone's robust business structure, market leadership, the quality of its products and investments in a new technology platform which will enable expansion across several new and existing markets and the future prospects in both the Health & Leisure and Education markets.
· Gladstone has a strong balance sheet with significant cash and no borrowings and it is ideally positioned for growth across all its markets and to take advantage of any opportunities that may arise.

In the end I think it will come down to the price that Constellation (or any other potential bidder) would offer for the business.

Either way, shareholders in Gladstone should get more that the 25p currently on the table. As I noted in my last post on this topic, if no one else enters the fray, I suspect that an increased offer of around 30p will see Constellation win (and still get a bargain).

P.S. I am a shareholder in Gladstone - and, as ever, DYOR

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