On 9 May 2022, Tungsten Corporation and Pagero Group AB (Pagero) announced that they had agreed the terms of a recommended all cash offer to acquire the entire issued and to be issued ordinary share capital of Tungsten.
The Swedish automation company had previously announced, on 24 March 2022, that it was considering a possible offer for Tungsten at 45 pence per share mere hours after Tungsten had already agreed the terms of an all-cash offer by Kofax Holdings International Ltd (Kofax) at 42 pence per share. Although Pagero’s proposal represented a 7.14% premium to the Kofax offer, Tungsten, perhaps not willing to risk a sure thing, announced that its board intended to unanimously recommend the Kofax offer, which valued Tungsten at £53.7m, to shareholders.
Kofax appeared pleased with the recommendation and Reynolds Bish, CEO of Kofax, commented:
‘Kofax has a strong track record of acquiring and integrating complementary companies with synergistic technology offerings, in order to deliver greater value to its stakeholders. We believe that Tungsten is a good example of such a company, and we look forward to completing the acquisition and working with the Tungsten team.’
Following the announcement, Tungsten’s share price jumped 16% to 45 pence per share and the Kofax offer appeared to be a done deal since Pagero had not presented a firm competing offer. However, Pagero went back to the drawing board and determined to win, emerged with an improved firm offer for Tungsten at 48 pence per share. The sweetened offer, which values the AIM-listed company at £61.49m, represents a 65.5% premium to Tungsten’s share price on the last business day prior to the commencement of the offer period, not to mention a £7.8m increase in Tungsten’s offer value compared to the Kofax offer. Tungsten promptly withdrew its recommendation for the Kofax offer in favour of the Pagero offer. Commenting on the offer, Tony Bromovsky, Chairman of Tungsten, remarked:
‘The Board of Tungsten is pleased to recommend Pagero's cash offer for Tungsten…This Offer provides our shareholders with even greater value in cash for their shares, as well as providing Tungsten with a strong and complementary partner to invest in our product development and enhance our offering for our global customer base.’
Seemingly delighted with the outcome, Bengt Nilsson, CEO of Pagero, commented:
‘Pagero's acquisition of Tungsten, when fully integrated, will create a business of significant scale and potential in the smart business networks and electronic document interchange space and enhance global career opportunities for employees of both entities who are key to our ongoing success. With highly complementary offerings and capabilities and access to Tungsten's industry expertise and highly skilled workforce, the combination will reinforce Pagero's already robust position in the US and UK markets, whilst Tungsten's wider international presence and operational resources will also provide an enhanced platform and cross-selling opportunities to accelerate the enlarged group's future growth, investment and reach in other key regions where increasing regulation around digitalisation and the use of e-invoicing offers significant potential for long-term value creation.
Our recommended Offer also provides Tungsten Shareholders with the certainty of a cash exit, in full, at a substantial and attractive premium, including to that of the offer from Project California Bidco Limited [a newly-formed vehicle, indirectly wholly-owned by Kofax] and over the price of a Tungsten Share prior to the commencement of the Offer Period and against a backdrop of continued global macroeconomic uncertainty.’
Investors reacted positively to the Pagero offer as the shares leapt to their highest in more than three years, closing up 8.6%, to 49 pence.
Tungsten has now delayed the shareholder meeting to approve the Kofax offer which was scheduled to take place and for now, Kofax has seemingly retreated announcing on 10 May 2022 that it is ‘considering its options and urges Tungsten Shareholders to take no action in response to the announcement by Pagero.’ However, the prospect of a bidding war for Tungsten could be on the horizon if Kofax decided to increase its offer.
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