The SMS Management & Technology Limited (ASX: SMX) share price has been a big mover this morning after it emerged that fellow information technology services company DWS Ltd (ASX: DWS) has made a takeover approach.
In early afternoon trade its shares have rocketed higher by around 13% to $1.58.
According to the release DWS has offered $1.00 in cash and 0.39 DWS shares for each SMS share as part of the Scheme of Arrangement, the equivalent of $1.66 per share.
Furthermore, SMS declared a fully franked interim dividend of 1.5 cents this morning following the release of its half-year result. This dividend will still go ahead as planned without a reduction to the scheme consideration.
In addition to this SMS has retained the right to declare a special fully franked dividend of up to 10.2 cents per share.
The SMS board has unanimously recommended the Scheme, believing it to be in the best interests of shareholders.
What now?
I think this was a good result for shareholders of SMS. Had it not been for the takeover offer, I believe its share price could have tumbled lower following the release of its half-year report this morning.
SMS reported a 10% drop in revenue and a 55% drop in earnings before interest, tax, depreciation, and amortisation compared to the prior corresponding period.
Further, the company reported a $44.5 million net loss after tax for the period. The majority of this loss was attributable to a non-cash impairment charge of $46.7 million relating to the writedown of goodwill of the SMS Consulting business.
That business continues to weigh on the company's results and is showing little sign of a turnaround.
In light of this, if I were a shareholder I'd be inclined to go along with the SMS board and vote in favour of the scheme.
