Smartgroup Share Price Falls 17 Per Cent Amid Takeover Collapse

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Smartgroup Share Price Falls 17 Per Cent Amid Takeover Collapse

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  • At the time of writing, the fleet management and salary packaging company’s shares are down almost 17 per cent to $7.88.
  • Investors have been selling down the Smartgroup share price this morning after it released an update on a takeover approach.
  • Last month the company received a non-binding, indicative and conditional proposal from a consortium comprising TPG Global and Potentia Capital to acquire the company for $10.35 per share. However, this has now ceased, sending SIQ’s share price plunging.

According to the release from the company, the consortium has informed Smartgroup that it does not intend to proceed with the proposal at $10.35 per share. As a result, discussions with the consortium in relation to the proposal have now ceased and the exclusivity provisions have terminated.

The release explains that the consortium has expressed an interest in proceeding with a revised proposal of $9.25 per share in cash. This is 10.6 per cent lower than the previous offer. Management notes that the new offer would still be a 17.7 per cent premium to the closing Smartgroup share price on 28 September. This compares to the 31.7 per cent premium of the previous offer. But this isn’t enough for the Smartgroup Board. Having received the new offer over the weekend, the Board has unanimously concluded not to proceed with discussions at this price.

Instead, the company intends to continue to focus on the delivery of sustained earnings and dividend growth for shareholders. It also advised that it is currently on track to deliver a calendar year 2021 financial performance in line with consensus expectations. Smartgroup Corporation Ltd (SIQ) provides outsourced administration, primarily salary packaging, software, distribution, and group services (SDGS) and fleet management services to employees of State and Federal Government departments, Public Benevolent Institutes, and corporate employers. SIQ operates mainly in three segments: Outsourced administration, Vehicle services and Software, distribution, and group services (SDGS).

SIQ has been able to post significant gains in both revenue and results as well as share price as shares if the company even after this recent plunge in price is still up over 35.96 per cent since this time last year and should continue. Smartgroup Corporation Ltd (ASX: SIQ), might not be a large cap stock, but it saw a double-digit share price rise of over 10 per cent in the past couple of months on the ASX. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock.

The potential share price takeover by the consortium fallout will likely drag the (ASX: SIQ) share price lower for a time as the stock consolidates and investors await more news from the company, however if SIQ continues with the pace they were blazing ahead with beforehand then this will be only a momentarily blip in its share price and investors will be wise to recognise this. Only time will tell for SIQ, but the future seems bright for savvy investors and this blip will pass and growth in both the company and it’s share price for investors will continue into the future.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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