EROAD rejects Canadian billionaire’s takeover bid
EROAD has rejected a $134.5 million takeover bid from Constellation Software, a Toronto-listed group chaired by billionaire Mark Leonard, saying it undervalues the transport fleet management business.
On June 22, Constellation Software lobbed a $NZ147 million ($134.5 million) takeover bid to acquire the ASX-listed transport fleet management group for $NZ1.30 a share in cash, 69 per cent higher than the last price of NZ77¢.
The EROAD board has rejected a $134.5 million takeover bid it received from Toronto-listed technology group Constellation Software last month.
The takeover offer was made by Constellation’s subsidiary Volaris, which says it has a “buy-and-perpetual-hold acquisition philosophy”, having snapped up hundreds of software companies since it was founded.
The New Zealand firm told investors it had written to Volaris to say its bid “materially undervalues EROAD’s business” by valuing the business at just 1.2 times its revenue guidance for this financial year.
“The proposal therefore falls below the level at which the board would be prepared to grant access to due diligence information, or to engage in negotiations on a scheme implementation agreement,” EROAD chairwoman Susan Paterson wrote.
Since May 30, Volaris has built up an almost 18 per cent stake in the company for $NZ23.7 million. If the offer was successful, Volaris had agreed to pay those earlier sellers any difference with the final sales price.
EROAD, which is dual listed on the ASX and the NZV, is a transport and logistics industry tech business. Its software is used to manage vehicle fleets, support regulatory compliance, improve driver safety and reduce the cost of operating a fleet of vehicles.
Its shares had been heavily sold off, languishing well below its listing price of $NZ3.90, but they soared more than 60 per cent to close up 42¢ at $1.13 on June 22, following the takeover proposal.
EROAD shares added 2 per cent to close at $1.25 on Wednesday.
Volaris owns more than two dozen technology businesses in Australia and New Zealand, including asset management and logistics company Smartrak. It tends to hold on to the companies it acquires, providing the smaller businesses access to resources to help them grow.
Constellation, its parent, is also highly acquisitive, buying up hundreds of smaller businesses to target industry verticals from utilities to real estate. Founded by Leonard, a venture capital investor, in 1995 and listed in 2006, Constellation has a market capitalisation of $C57 billion ($64 billion).
EROAD had previously hired Goldman Sachs to help conduct a strategic review to identify partners that would help the business accelerate its North American growth, as part of a wider plan to return the business to profitability.
Ms Paterson told shareholders the company had made “meaningful change” to its operations, removed costs from the business and that it was exploring ways to speed up its growth plans.
“EROAD’s management team continues to make compelling progress to reposition the business with the aim of generating positive free cash flow and drive profitable growth,” she wrote. The company will provide a further update on its strategy later this month at its annual shareholder meeting.
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