Baring Asia Private Equity entered into an agreement with SAI Global earlier this week, after making a cash-offer of A$4.75 per share for 100% of the company, according to an announcement on the Australian Securities Exchange.
The offer price represents a 32% premium to where SAI closed the day before the announcement and will give the companyl a valuation of A$1.079 billion.
The stock instantly moved up after it starting trading on Friday, closing the week at A$4.65. That still leaves a 2.15% gross return to risk arbitrage investors, equivalent to an annualised rate of return of 9%.
The offer is “reasonable” given the challenges faced by the company’s standards and property services division, said a Macquarie analyst in a research report. But the directors sounded a much more bullish note.
Andrew Dutton, SAI’s chairman, said in a conference call with investors that the deal is “risk-free, it’s complete, it’s compelling, and it’s far superior to the individual sale of the assurance business”.
A long search
SAI Global has been looking for buyers since 2014. Over 15 bidders have put their hands up but the board could not reach a consensus to recommend any of them to the shareholders.
Pacific Equity Partners joined with KKR for a potential bid of between A$5 and A$5.25 per share two years ago. But the deal fell apart due to uncertainty over a publishing deal.
SAI was granted the exclusive right to publish all material released by Standards Australia for a period of 15 years. But that deal comes up for renegotiation in 2018.
The acquisition appears to make sense for Baring. It recently acquired Techstreet, an online standards distributor this year.
“This would provide Standards Australia with a larger distribution platform by combining SAI with Techstreet,” said an analyst at Moelis Australia Securities in a note to investors. “We believe this should assist Barings in negotiations with Standards Australia regarding the existing Standards agreement which matures in December 2018.”
Baring Private Equity Asia, which was founded in 1997, manages over 35 portfolio companies with total committed capital of over $10 billion, according to the company website.
SAI Global is a global provider of risk management and property services, and employs around 2,000 staff in 29 countries across Europe, North America and Asia. It publishes and distributes standard compliance materials.
The deal is still subject to SAI shareholder approval, court approval and Foreign Investment Review Board approval.
Some 75% of votes in favour are needed by the shareholders. The top three shareholders of SAI Global are Perpetual, which owns 13.2%; Ellerston Capital, which owns 11.1%; and Vulcan Value Partners who owns 10.58%.
SAI Global’s annual general meeting will be on October 27, but the final approval from investors will not come until early December. The deal looks likely to be complete before the end of the year.
Credit Suisse is the financial adviser for SAI Global and Goldman Sachs is advising Baring. Gilbert and Tobin is the legal advisor for SAI Global.