Stay updated with the latest news from the Technology sector with our free subscription!
Start your day with the myFT Daily Digest email, delivering the most recent Technology sector news right to your inbox every morning.
Swedish private equity firm EQT showcased its investment success by listing German software company Suse in 2021. Now, EQT has an opportunity to repeat this achievement. After a significant decline in the share price, EQT is offering to repurchase the public stake at a discounted price.
Nuremberg-based Suse entered the market with optimism, aiming to captivate enterprise software developers with its open-source Linux operating system. However, fierce competition hindered its progress, leading to multiple guidance misses and a profit warning in May.
The company has recently welcomed Dirk-Peter van Leeuwen as its new CEO, who was previously with rival Red Hat. If he can successfully turn the business around, EQT will be buying back shares when prices are at their lowest. Nevertheless, any revival will require time and effort.
EQT originally acquired Suse from Micro Focus in 2018 for $2.5bn and subsequently listed the company in 2021 at a valuation of €6bn or €30 per share. EQT currently holds 79% of the shares and has sold a stake for €1.1bn in 2021. The buyback offer stands at just under €600mn, subject to acceptance from all shareholders.
Considering net debts, the offer values Suse at around four times this year’s projected sales, approximately €3bn. In comparison, the initial public offering placed the company at 14 times sales. This decline in value aligns with the broader tech sector’s decrease. Red Hat, owned by IBM, also faces slowing growth, albeit still expected to report double-digit growth this year. Both companies encounter competition from free and open-source alternatives like Canonical’s Ubuntu.
Suse’s underperformance justifies the low buyback price. The company experienced minimal growth in the second quarter, with only a 1% increase in revenues compared to the previous year. While mid-single-digit growth is anticipated for the full year, it pales in comparison to the double-digit figures achieved at the time of the company’s listing two years ago.
Public shareholders may question their initial investment in light of Suse’s current performance. If Suse thrives as a fully private company, these shareholders should reflect on the potential factors that hindered its progress before.
If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button ‘Add to myFT’ above the headline
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.
