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Electronic-signature software group Nitro Software (ASX: NTO) could be at the centre of a bidding war after revealing it has two off-market takeover offers on the table with the most recent announced today valuing the company at $490 million.
Nitro announced on Friday that Sydney-based private equity group Potentia Capital Management, the company’s largest shareholder with a 19.8 per cent stake, was looking to buy the remaining shares it didn’t already own for $1.80 each.
But as the $441 million offer was rejected by the Nitro board today on the basis that it undervalues the company and is not in the best interests of shareholders, Nitro revealed a new offer has been received from Canadian software company Alludo which is owned by private equity giant KKR.
The conditional bid from Alludo, which owns the Parallels, CorelDRAW, MindManager and WinZip brands and delivers graphic solutions for digital remote workforces, is pitched at $2 per share. The Nitro board is prepared to accept this bid should a better offer not eventuate.
The market seems to think a higher bid is a possibility with shares in Nitro shooting to a peak of $2.07, up almost 20 per cent, in early trading. They were still selling above the bid price at $2.03 by 11.24am AEDT.
At the heart of Alludo’s interest in the Nitro business is the company’s customer base of about 13,000 corporates and three million licenced users globally that are locking into its PDF services at a cheaper rate than the dominant market provider Adobe Acrobat.
Nitro, which is led by company founder Sam Chandler, says its services are closely aligned with those of Alludo, which was formerly known as Corel Corporation prior to the KKR buyout in 2019.
While Nitro is keen to accept a binding offer from Alludo, the company says it will still consider the bidder’s statement from Potentia and prepare a formal response. The Potentia offer will be open for acceptance by Nitro shareholders in about two weeks.
Potentia partner Michael McNamara last week declared Potentia’s intentions to ‘work constructively with the Nitro board to conclude a value-creating deal for our fellow shareholders'.
“We have already had friendly and constructive dialogue with the Nitro board, and this offer is being made to provide them with certainty so that they can engage with us fully and provide access to diligence.”
In the meantime, Nitro warns that a binding offer from Alludo may not be forthcoming. Alludo’s off-market proposal has an alternative aim of a minimum 50.1 per cent acceptance, which means the suitor is happy to walk away with a controlling interest in the company if the full takeover doesn’t succeed.
Alludo has already conducted due diligence for the acquisition and Nitro says any remaining due diligence will be ‘confirmatory in nature’.
Nitro and Alludo have entered into a process deed, giving Alludo 21 days of exclusivity for this final due diligence to be conducted before a formal bid is received.
“Subject to Nitro and Alludo agreeing an implementation deed on terms acceptable to Nitro, it is the Nitro board's intention to unanimously recommend that shareholders vote in favour of the scheme,” says the company.
Acceptance by the Nitro board is still subject to no higher offer being received and an independent expert’s finding that the offer is fair and reasonable.
“There is no certainty that the Alludo proposal will result in a binding transaction being put forward to shareholders for their consideration,” says the company.
“Any takeover offer as part of the Alludo proposal will only be made when, and if, an implementation deed is entered into which commits Alludo to make a takeover offer.”
Alludo will fund the takeover via equity sources which Nitro says are expected to be fully committed once an implementation deed is signed.
“Nitro shareholders should take no action at this time. The company will continue to keep shareholders and the market informed of developments.”
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