A check of the stock chart for leading information, compliance and assurance services group SAI Global Limited (ASX: SAI) shows that its share price change over the past 12 months has been almost flat.
This one-year return belies the fact that it has been an eventful year for the company.
Here is just some of what has occurred in the past year:
- Private equity firm Pacific Equity Partners (PEP) submitted a non-binding proposal in May 2014 to acquire the whole company at between $5.10 and $5.25 per share, valuing the company at an enterprise value to earnings before interest and tax multiple of approximately 18.6x.
- In June 2014, the board of SAI advised that other interested parties had approached the company expressing an interest in the assets of the company. This development led to the board deciding it was in the best interests of shareholders to conduct a formal process to review its strategic options.
- Post 30 June 2014, SAI released its full year financial results which showed a 10.3% increase in revenues to $527.5 million and a 6.3% increase in underlying net profit after tax to $45 million, which equated to 21.4 cents per share.
- In September 2014 the company announced to the market that it had received multiple proposals from parties interested in acquiring one or more of SAI's businesses.
- In October 2014 the board announced that despite all the interest shown in acquiring SAI and its parts, no compelling transactions had arisen.
- Post 31 December 2014 the company released its interim results for the half year. These results showed a 2.1% improvement in revenues and a significant 21.6% leap in underlying profit to $25 million.
From a share price point-of-view, the stock was trading at around $4.15 prior to news of PEP's approach, after the news broke the shares soared as high as $5.26. Following the announcement that there would be no transaction the stock then sank to a low of $3.49 from which it has since recovered to trade back at the $4.15 level.
While there are plenty of examples (Qantas Airways Limited (ASX: QAN) and Bradken Limited (ASX: BKN) come to mind) where the failure of the board to execute a deal appears to be a missed opportunity, in other cases it turns out to be for the best.
Given the strong increase in profits for the half year and the relatively good performance of the share price in the past year, it's possible that in the long-term shareholders will have been well served by this outcome.
