SMS Management & Technology (ASX:SMX) shareholders have given ASG Group the green light to go ahead with its proposed acquisition of the publicly-listed IT services firm.
In a special investor meeting held on 1 September, SMS investors voted in favour of ASG’s proposal, with roughly 98.5 per cent of the shareholder votes backing the deal.
ASG Group, which is owned by Japan’s Nomura Research Institute (NRI), made a binding offer worth around $124 million for the Australian IT services company.
The move effectively knocked fellow Australian Securities Exchange (ASX)-listed IT services firm, DWS (ASX:DWS), which had pitched its own $124 million offer for SMS earlier in the year, out of the running for ownership of the company.
Indeed, SMS had entered into an offer agreement with DWS in February.
In the end, DWS told shareholders on 19 June that it would not make a counter-bid to ASG’s $124 million cash offer for the company, leaving ASG as the last buyer standing in the race to acquire SMS.
Now, with shareholder backing, ASG is getting set to plough into the integration of both companies as soon as the remaining regulatory hurdles have been cleared and the transaction has been finalised.
“By the end of December, we expect to have that integration done,” ASG Group chief executive officer, Geoff Lewis, told ARN. “We will be aggressively rolling that out to get as much of the capability of the two organisations.”
The deal is expected to close on 26 September. SMS will be delisted from the ASX on the same day.
For Lewis, the two businesses are complementary, with ASG being strong in the government space and SMS being strong in the corporate sector. As such, the combined entity is set to be able to take on some of the larger, global integrators, operating in the local market.
“Both ASG and SMS have been fighting in a pretty small pool,” Lewis said. “We never really competed with SMS, so it’s been a very complementary thing. We’re very excited about competing with them [the big global integrators].
“The capability of the business of the combined business is exciting; ASG’s new world, application space in Oracle and SAP, SMS with consulting, Microsoft, Salesforce; it’s just a very synergistic fit,” he said.
Lewis also flagged the potential synergies that the two companies are likely to see upon integration.
“There are some really good complementary aspects to it that we can get some revenue synergies from,” he said.
While Lewis would not be drawn on what impact the joining of the two companies would have on the total employee numbers of the combined entity, he said that the businesses would be integrated and run under one structure, which will be branded as “ASG: an NRI company”.
“Obviously, as the normal course of business, there is some change when you’re integrating businesses,” he said. “I don’t have any feel for what that looks like, but that will roll out during the integration process, which will be quick.
“When it comes to capability we expect to be growing over the next three months and winning new deals. ASG’s got a good strong pipeline, so does SMS. So, hopefully we’d be looking to keep as many of our staff to get working on our organic growth,” he said.
Meanwhile, Lewis said he is not concerned about the $42.1 million net loss SMS posted for the financial year of 2017 ended on 30 June.
“If you look at the trading for the last period, it’s certainly stabilised, and operationally, it’s going okay,” Lewis said. “And we certainly see a lot of opportunity in the combined businesses, and…the two businesses together will position us as a $500 million-revenue, 2000-people organisation.
“We should be very well-positioned to be a very aggressive competitor against those traditional, slow-moving multinationals,” he said.
Following the shareholder vote, the SMS board has determined to pay shareholders a fully-franked special dividend of 10.2 cents per SMS share, subject to the scheme becoming effective – it is currently expected to occur on Thursday, 7 September 2017.