Earlier this year Hummingbird had reportedly put itself up for sale, although it later denied this. On May 25 it entered into negotiations to be purchased by affiliates of California-based Symphony Technology Group. However, the board quickly ran to heavy flak from investors for not entertaining more bids, with Hummingbird’s chairman Fred Sorkin being heavily criticized for not soliciting rival bids from other strategic buyers.
Then on July 6, Open Text tabled a hostile $483m bid for Hummingbird that topped the earlier offer of $466m made by Symphony Technology Group. Waterloo, Ontario-based Open Text offered $27.75 per share in cash for Toronto-based Hummingbird.
Now Hummingbird has said it will talk to Open Text about the terms under which Hummingbird’s board of directors would support an offer worth $27.85 in cash per share.
To facilitate these negotiations, Hummingbird has executed a non-disclosure agreement with Open Text and has agreed to provide Open Text with appropriate access to non-public information regarding Hummingbird, the company said on Friday. This agreement contains standstill provisions that prevents Open Text from acquiring Hummingbird at a price of less than $27.85 per share in cash prior to October 31, without the approval of Hummingbird’s board of directors, the company said.
Hummingbird also said it plans to adjourn a shareholders’ meeting that had been due to discuss the Symphony bid in order to ensure that shareholders have as much relevant information as possible about the alternatives. It said a new meeting has been set for August 18.
The opening of talks with Open Text could raise the likelihood of a bidding war over Hummingbird, especially considering that both Open Text and Symphony own Hummingbird shares. As of July 6, Open Text held 22.3% while Symphony had 18%.
There is a history of bad blood between the management teams of Hummingbird and Open Text, and Hummingbird must be hoping that Symphony will come back with an improved offer. The board of Hummingbird is still backing the $26.75 per Hummingbird share offered made by Symphony, citing the uncertainty about the status of the Open Text offer, although it said it would revisit this recommendation from time to time.
The acquisition of Hummingbird by Open Text is sure to present a challenge to integrate both companies operationally and technologically. Both of these companies have gained reputations in the industry as being serial acquirers and have built up their respective content-management suites from a string of acquisitions over several years.
Open Text’s last major content-management acquisition was a German content management firm Ixos Software AG a couple of years ago, but integration has gone far from smoothly. The geographical proximity of Hummingbird will make things easier but the jury is still out whether Open Text can generate new revenue from a combination of what seems to be two overlapping technology sets.
The future of Hummingbird’s legacy host connectivity and terminal emulation software business also remains in doubt under Open Text’s wing. The same can be said for Hummingbird’s business intelligence and data warehousing tools business.
