SMS bidding war comes to a head

SMS bidding war comes to a head

DWS and ASG Group lock horns over $124M acquisition

ASG chief executive Geoff Lewis.

ASG chief executive Geoff Lewis.

The bidding war for SMS Management & Technology (ASX:SMX) has come to a head, with ASG Group making a binding offer for the publicly-listed IT services company.

The bid, which was received by SMS late on 13 June, means that the company now has to choose between the ASG offer, and the binding $124 million bid made by fellow publicly-listed IT services player, DWS (ASX:DWS), in February.

Until now, ASG’s moves to acquire SMS had not progressed beyond the expression of interest (EOI) stage. It is understood that ASG’s offer, which sees the company offer $1.80 in cash per share, comes to around $124 million – in line with the earlier DWS offer.

Earlier on 13 June, SMS told shareholders that ASG had completed its due diligence process, and that it was seeking approval from the board of its parent company, Japan’s Nomura Research Institute (NRI), to proceed with the proposed acquisition offer.

With the binding offer now in place, it appears that NRI’s board has finally sanctioned the proposed acquisition of the Australian IT services provider.

The SMS board told shareholders on 14 June that it is considering the terms of the ASG offer, and whether it represents a superior proposal to the DWS bid.

SMS previously told investors that, after receiving advice from its legal and financial advisors, 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.

As a result, SMS postponed 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.

For DWS chief executive, Danny Wallis, the approach by ASG Group and, more importantly, SMS’s move to court the company’s bid, has come as a disappointing blow.

"It's disappointing that Australians don't support keeping business in Australia. Australian shareholders had the chance to vote to support profits staying in Australia and supporting Australian superannuation funds, but now it could go to the Japanese," Wallis told Fairfax Media.

"We're especially disappointed given the amount of time and money we've put into this,” he said.

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