Behold, the dwindling numbers. Although not a tale of horror, the vanishing act of UK technology companies listed on the market is causing concern. The FTSE All Share Software index currently consists of only six members, the smallest number in fifteen years. To add to this, another company may soon disappear from the stock exchange.
Swedish private equity group EQT has taken an interest in Alfa Financial Software, valued at £580mn. CHP Software and Consulting recently released a statement revealing that EQT is in negotiations with Alfa’s largest shareholder and the holding company of its founder Andrew Page. These discussions follow previous rumors of a potential deal earlier this month.
EQT has until early July to finalize their offer. If successful, CHP Software, which holds 60% of Alfa’s shares, has committed to accepting a deal with EQT at a price of 208p per share, amounting to £609mn. However, there is a clause that would allow CHP to consider a competing bid at 239p per share.
Although Alfa may seem small, it possesses highly desirable qualities. Under Page’s guidance, Alfa has established itself as a leader in asset financing software. In the first quarter of this year, sales saw a 20% year-on-year increase. Alfa competes against major enterprise software groups such as SAP, Oracle, and financial specialist Fiserv. Therefore, any of these companies may also show interest in acquiring Alfa.
However, making such a move would require a generous offer from a rival bidder. The rumored 208p-per-share offer already values Alfa at 5.8 times its forward 12-month sales, based on Refinitiv data. This surpasses Germany’s SAP, which is trading at 4.4 times. At 239p per share, the multiple rises to 6.7 times, putting it in the realm of US sector valuations. The S&P 500 software index is currently at 9 times forward sales.
Nevertheless, at the higher price point, the buyer would need to have faith in Alfa’s ability to exceed current forecasts of 33% earnings per share growth by 2025. Even then, Alfa would have an unappealing price-to-earnings growth (PEG) ratio of 6.
Perhaps this explains the lackluster response from the market on Wednesday. Traders may doubt the possibility of rival offers, including one from EQT. Alfa’s share price only rose by 5% to 198p, which falls below the potential offer price. This suggests that minority shareholders should not be too greedy.
City Bulletin is a daily City of London briefing delivered directly to your inbox as the market opens. Click here to receive it five days a week
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
