While the offer is a 34% premium to an ABST stock price nearing annual highs, investors need to assess if it’s an adequate reward
Shares of Absolute Software (NASDAQ:ABST, TSE:ABST) surged Thursday on news that it had received a takeover offer from Crosspoint Capital Partners. With that near 33% gain, ABST stock is within 10% of its 52-week high of $12.58 per share.
The deal calls for Vancouver-based Absolute’s shareholders to get $11.50 per share in cash on completion of the transaction valued at $870 million. The cash consideration represents a premium of 34% to the closing share price on the day prior and 38% to the closing price and 30-day volume-weighted average price (VWAP).
While the transaction allows for shareholders to cash out at a solid premium, it does mean that future upside from growth will be left on the table.
However, given the debt balance and growing need for funding requirements, alternatives to secure the firm’s financial future would have likely come in the form of further equity issuances with shareholder dilution.
Crosspoint Capital claims that it will bring significant cybersecurity expertise that will help drive the next phase of growth for Absolute. That expertise in the cybersecurity sector is crucial to the company’s success, and this acquisition represents a significant milestone for Absolute Software.
The firm has invested in McAfee and Forescout, and focuses on cybersecurity, privacy and infrastructure software sectors. Absolute touts that it is “the only provider of self-healing, intelligent security solutions and the only endpoint provider embedded in over 600 million devices globally.”
Pre-Approved Offer
The chance that a competing offer from another potential suitor is possible, however given the growing levels of uncertainty in the economy as interest rates rise — this could be as good as it gets for now.
The transaction which has already been approved by the board will now require two thirds of votes from shareholders at the special meeting which is expected to be held in late June.
Greg Clark, managing partner of Crosspoint Capital Partners commented on the deal saying “We are impressed with how Absolute has built upon its asset visibility and control heritage and expanded into solutions that provide endpoint resilience and the reliable access needed in today’s hybrid work environments. We look forward to partnering with Christy and the Absolute team as they continue to deliver highly differentiated solutions to the market.”
Rare Breed
The “Christy” that Crosspoint’s Clark looks forward to working with is Christy Wyatt, president and CEO of Absolute.
She is a rare breed in Canada, where less than 7% of the largest publicly traded companies have a woman at the top, The Globe and Mail reported in March.
In fact, as data from an Equileap study on gender equality at Canadian companies revealed, “there are more CEOs named Michael (7) than female CEOs (6),” Morningstar reported earlier this year.
Her ongoing role wasn’t specified in the companies’ press release, though she said: “For the past five years, our focus has been on creating the industry’s only truly self-healing security platform centered on resilience.” Let’s see about the next five.
Analyst Sees Exit Strategy
TD Cowen analyst David Kwan said that while the cash offer is at a significant premium that is near ABST’s annual high share price, it is still materially below the firm and streets’ target prices.
Despite this, Kwan made a good point that the offer gives an exit strategy for investors that were concerned with the Education Businesses trajectory, customer headwinds for Secure Access and the high debt levels.
TD Cowen has a ‘buy’ call and $16 target price on the US listing of the stock.
Monday Earnings
Regardless of the transaction, Absolute will report third-quarter results on Monday.
The Street is expecting ABST to post sales just shy of $60 million for the quarter with adjusted EBITDA of around $15 million.
Forecasts see a net loss of around $4 million.
With ABST shares likely being taken out, now could be the time to search for your next stock idea.
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