ASG Group appears to be stepping up its bid to acquire SMS Management & Technology (ASX:SMX), with the company flagging one final hurdle standing in its way to potentially striking a deal.
Perth IT solutions firm, ASG Group, swooped in on SMS Management & technology in late May, flagging a potential 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 told shareholders on 13 June that ASG had notified it that it had completed its due diligence process, and that it is now seeking approval from the board of its parent company, Nomura Research Institute (NRI), to proceed with the proposed acquisition offer.
ASG Group offered an unsolicited expression of interest (EOI) to potentially acquire 100 per cent of the company for $1.80 per share – a potentially much more lucrative deal than the DWS agreement, which comprised a per-share offer of $1.66.
According to SMS, ASG has indicated that board approvals are the only outstanding expression of interest (EOI) condition not otherwise set out in its Scheme Implementation Agreement (SIA) for the deal. ASG said it currently has no reason to believe that these approvals will not be forthcoming.
After receiving advice from its legal and financial advisors, SMS said it had concluded that the potential offer from ASG may lead to a superior proposal than the agreement previously entered into between SMS and DWS.
However, the company warned shareholders that there is no certainty that an offer for SMS from ASG will eventuate. That said, the company plans to continue to engage with ASG over its proposed acquisition deal.
As a result, SMS has approached the court to postpone a shareholder meeting that had been scheduled for 14 June to discuss, and decide upon, the previous acquisition agreement with DWS.
DWS entered into a scheme implementation agreement in February to acquire SMS Management & Technology.
SMS told shareholders in late May that its board believed that the proposed acquisition by DWS by scheme of arrangement was still in the best interests of SMS shareholders, regardless of ASG’s approach.
This appears to be no longer the case.
However, DWS Group’s proposed acquisition of SMS had already seen both companies flag a potential shake-up in their boardrooms and among the companies’ C-suites.
In a scheme booklet on the deal lodged with the Australian corporate regulator, the two companies highlighted the areas in which they expected to see synergies – or cost savings – arising from the completion of the acquisition.
In the firing line were SMS board costs, duplication in senior management roles, such as CEO and CFO, registry and listing costs, and back office costs.
“It is DWS’s intention that, post-implementation, the current board of SMS will be replaced with DWS appointees, and that [DWS CEO] Danny Wallis will be the CEO and managing director of the merged group,” the scheme booklet stated.
This eventuality, however, now seems to be facing increasingly stiff odds as ASG Group’s offer begins to solidify and take shape.