E-learning software maker SkillSoft PLC said it agreed to be acquired by a consortium of private-equity firms for about $1.1 billion, an offer that investors think undervalues the company.
The cash offer of $10.80 per share, made by funds owned by Berkshire Partners, Advent International and Bain Capital, was 11 percent more than SkillSoft's closing price on Thursday.
However, American depositary shares of the company edged past the offer to as high as $11.21, or up 15 percent, indicating that investors might be expecting a better offer.
As of Thursday's close, the stock had dropped about 11 percent since touching a 52-week high of $10.99 in December, higher than the investor group's offer.
"We think we got the best price we could negotiate balancing a lot of the things that our board knows in terms of their understanding of the market," Chief Executive Chuck Moran said on a call with analysts.
The merger agreement has a "go-shop" period, ending on March 6, that allows SkillSoft to scout for better offers.
However, the company said the board intends to recommend that shareholders vote in favor of the acquisition.
"We would have hoped for a modestly higher price but business was challenging through this renewal period that they just completed," Craig-Hallum Capital analyst George Sutton told Reuters by phone.
"The higher price would most likely come if there is a strategic buyer who can integrate the cost structure more effectively than a private equity firm."
Signal Hill analyst Trace Urdan said possible strategic acquirers could include IBM and Accenture PLC.
Investment firm Columbia Wanger Asset Management is the largest stakeholder in SkillSoft with a 22 percent interest. The firm was not immediately available for comment.
Wedbush Securities analyst Ariel Sokol said in a note, "We wonder whether parties involved might have to increase the price of the company to mollify investors concerned that the company could potentially be sold a year too early."
As of Thursday's close, the company traded at a forward earnings multiple of 13 times and according to analysts the multiple could push to 16.5 times earnings. The offer values the company at 14.6 times 2010 earnings.
"Characteristics of the training market have certainly shifted during this economic time. The growth rates have been reduced," CEO Moran said, adding that fiscal 2010 bookings were down from the prior year.
The company, which had revenue of $328 million for the year ended January 2009, provides Internet-based training courses and software to businesses and governments.
It competes with companies such as India's NIIT, Kenexa and Blackboard Inc. in the increasingly competitive e-learning software and services market.
The e-learning market accounts for a small part of the overall training market, and its growth has slowed in recent years due to the general economic slowdown and pricing pressures.
SkillSoft, whose customers include IBM, Merck, Toyota and Hilton, however, posted a higher-than-expected profit for the third quarter and raised its outlook for the year.
The company will continue to be headquartered in Dublin, Ireland, and led by the current management team, including Moran as CEO, it said.
The buyout will be financed with a $605 million financing package from Morgan Stanley and Barclays Capital, who are advising the investor group.
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