ASG Group has taken a step closer to making good on its hopes of acquiring SMS Management & Technology (ASX:SMX), striking an agreement to set the wheels in motion for the proposed deal to continue.
SMS told shareholders on 20 June that it had entered into a scheme implementation agreement (SIA) with ASG Group for the latter to acquire 100 per cent of its business for $1.80 per share – valuing the proposed deal at around $124 million.
The move comes after fellow IT services company, DWS (ASX:DWS), which struck a deal in February to acquire SMS for $124 million, conceded it would not submit a counter bid for SMS after ASG Group made a binding offer for the company on 13 June.
SMS, which is publicly listed on the Australian Securities Exchange (ASX) has now told investors that a shareholder meeting to decide on the earlier offer from DWS that it had scheduled and then postponed will no longer take place.
SMS reiterated that its directors consider the ASG Group offer to be in the best interests of its shareholders, and recommended unanimously that investors vote in favour of the agreement, noting that the scheme consideration implies an enterprise value of $134 million.
“This represents an attractive valuation for SMS,” the company told shareholders, “particularly in the context of structural changes to the industry, including intensified competition from large offshore entrants and expansion of professional services firms into the sector.
“These structural changes have impacted the performance of SMS over recent years,” it said.
While ASG Group now appears to be nearing the home stretch in its ambition to snap up SMS, DWS chief executive, Danny Wallis, has expressed some displeasure at the approach by ASG Group and, more importantly, SMS’s move to court the company’s bid.
"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.
The implementation of the scheme that will seal ASG’s acquisition of SMS remains subject to a number of conditions, including approvals from the corporate regulator, approval of shareholders and the court and an independent review ensuring that the offer is in the best interests of shareholders.