Canadian software and services company Geac Computer Corp Ltd said last week it will acquire UK-based JBA Holdings Plc in a deal valued at roughly C$205.5m ($136m) – or less than half of the company’s 1998 revenue. Speculation about an imminent takeover of the company had intensified in recent weeks, as several large tranches of the JBA shares traded hands soon after the company admitted it had been approached with an indication of interest.
As it turns out, Geac was interested enough to make a firm offer of 2.5 pounds per share, which has been unanimously endorsed by the boards of both companies. Even as the acquisition appears to be a bargain for Geac, the offer represents a premium of 71% over JBA’s closing mid-market price of 146.5 pence on July 13, the day before the announcement that it had been approached by a possible suitor. In conjunction with the agreement, JBA’s directors have tendered their holdings – representing an 11.6% stake – to Geac’s UK subsidiary. Geac already owned a 2.7% stake. The deal now waits for approval by at least 90% of JBA shareholders.
One possible impediment to the closing of the transaction might come in the form of Peter Rigby, chairman and CEO of privately- owned Specialist Computer Holdings Ltd, which itself had been considered a possible suitor for JBA. Interests controlled by Rigby have built up a 11.27% holding in the company – enough to potentially vote down a merger with Geac.
JBA, a supplier of ERP software to mid-tier companies, is coming off the worst fiscal year in its history and has recently re- focused on its traditional mid-market business after an unsuccessful and costly bid to compete in the upper echelon of the ERP market. The cost structure at the company has been reduced accordingly, but JBA CEO Ken Briddon says the benefits of those moves have yet to materialize. Still, the company booked 1998 revenues from continuing operations of roughly 223m pounds ($352m) and would appear to be vastly undervalued on the London Stock Exchange.
JBA does the majority of its business in the food and beverage, apparel, automotive supply, and electronics markets and claims roughly 4,500 customers in over 50 countries. Its revenues have grown at a compounded rate of over 20% since 1994. The acquisition appears to be a good fit for Geac, which also specializes in applications for vertical markets, as the two companies claim they don’t compete and insist their operations, markets and geographies are highly complementary. The commercial logic of the deal is compelling, Briddon said. Geac had 1998 revenues of C$793m ($526m).
