Perth IT solutions firm, ASG Group, has swooped in on SMS Management & technology, making a bid for the company just three months after fellow IT services player, DWS, struck a $124 million deal to acquire the publicly-listed company.
SMS (ASX:SMX), which is listed on the Australian Securities Exchange (ASX) told shareholders on 29 May that ASG Group had offered an unsolicited expression of interest (EOI) to potentially acquire 100 per cent of the company for $1.80 per share.
The offer, if it progresses, potentially represents a greater total value than the $124 million acquisition deal struck between SMS and fellow publicly-listed IT services company, DWS (ASX:DWS), in February, which comprised a per-share offer of $1.66.
As it stands, the SMS board, after receiving advice from its legal and financial advisors, said it has concluded that ASG Group’s EOI may reasonably be expected to lead to a superior proposal to the previous offer by DWS.
“The SMS board is committed to acting in the best interests of SMS shareholders and therefore will engage with ASG, subject to the negotiation of an appropriate confidentiality agreement,” the company said in a statement. “DWS has been notified of the key terms and conditions of the EOI.”
At the same time, SMS said that there is no certainty that an offer from ASG will eventuate.
“The SMS board continues to believe that the proposed acquisition by DWS by scheme of arrangement…is in the best interests of SMS shareholders,” SMS said.
“The SMS board continues to unanimously recommend that SMS shareholders vote in favour of the DWS scheme in the absence of a superior proposal emerging or the independent expert changing or qualifying their conclusion that the DWS scheme is in the best interests of SMS shareholders,” it said.
DWS entered into a scheme implementation agreement in February to acquire SMS Management and Technology.
DWS said, in a statement on the ASX at the time, that the combination of both entities will provide consolidation in the Australian IT services market, a “goal that has been sought by industry participants over many years”.
"Acquiring SMS will enable DWS to offer services across the full spectrum of the IT services market and give rise to numerous cross-selling opportunities,” DWS said.
The potential offers come after a difficult year for SMS. In November last year, the company said it would pin its hopes on the 2017 financial year after structural changes, cancelled contracts, and failed investments hit its 2016 earnings with a 45 per cent decline.
The company reported an eight per cent fall in revenue, to $328.7 million in its annual results in August 2016, along with a fall in earnings before tax (EBITDA), which declined by 45 per cent to $15.7 million for the year ending June.