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Francisco Partners has moved into pole position to win the bidding war for Kewill, after rival private equity group Symphony declined to submit a counter offer for the struggling software company.
Symphony on Tuesday refused to increase its 106p per share all cash offer for Kewill – a bid that was trumped a week ago by the 110p approach from Kinetic Bidco, Francisco’s investment vehicle.
Although a third party could potentially better Francisco’s offer before a deadline on Friday, the withdrawal of Symphony has almost certainly pushed Kewill into the hands of Francisco.
The most recent all-cash offer from Francisco, which values Kewill at £102.7m, has been backed by shareholders controlling 24.9 per cent of Kewill’s stock, as well as the software group’s management, who hold 1.1 per cent.
The group of shareholders – Centaurus Capital, SVG Investment Managers, RGM Capital, and Pendragon Capital – has agreed not to accept a rival offer unless it is priced at 118.25p, or higher, and tabled before Friday.
The 110p price is a 45 per cent premium to the software developer’s closing share price on May 1, the day before Francisco’s first offer.
The initial bid was trumped by Symphony at the 11th hour as Kewill was about to set the seal on the acquisition in court. This 106p per share bid was subsequently overtaken by Francisco’s counter offer last week of 110p.
All three offers tabled during the bidding process have been recommended unanimously by Kewill’s board.
Kewill has issued several profit warnings over the past few years, and reported a pre-tax loss of £740,000 in the six months to the end of September, from revenues of £27.2m.
The sale of Guildford-based Kewill brings to close a period of investor agitation for the software company’s management to improve its performance or find a suitable buyer, and is an example of the quiet revolution hitting the boardrooms of some small UK technology companies.
The takeover must gain approval from about 74 per cent of shareholders in Kewill and a court hearing is scheduled for July 3 to sign off on the acquisition.
It was Kewill’s logistics software – used to track inventory in transit and in warehouses – that drew Symphony and Francisco into the bidding war.
Although Kewill is expected fit in well with Francisco’s technology portfolio, analysts suggested that Symphony would have been able to draw out more synergies from a takeover.
Francisco, which has previously invested a total of $2.5bn in 30 software and services companies, has not decided the fate of Kewill’s 600 employees, although Paul Nichols is poised to step down as chief executive after a decade at the helm.
Francisco Partners declined to comment. Kewill shares fell 2 per cent to 110p.