Shares of data analytics business Veda Group Ltd (ASX: VED) have returned to normal trade today, rising as much as 4.3% after it confirmed Equifax has increased its takeover offer price.
So What: Equifax originally offered to pay $2.70 per share for Veda Group late last month. Although that represented a premium of 35% to Veda Group’s then $1.99 price tag, Veda Group was concerned that the offer price didn’t fully appreciate the company’s significant growth potential.
Indeed, Veda Group enjoys a dominant position in the local credit analysis market, with significant barriers deterring the entry of other competitors. Better yet, the company is also set to benefit from the introduction of the comprehensive credit reporting regime, which has enabled strong growth in international markets in years gone by.
Essentially, this regime enhances the data that Veda Group can provide to its clients, providing them with more information regarding which customers to extend credit to.
Now What: In order to better account for this growth potential, Equifax has increased its offer price to $2.825 a share. That represents a $75 million improvement on the company’s market value, and an 18.1x multiple of Veda’s earnings (before interest, tax, depreciation and amortisation, or EBITDA) for the 2015 financial year.
Veda Group has agreed to recommend investors accept the Revised Proposal, assuming it proceeds to a Binding Offer after Equifax conducts its due diligence on the business.
Considering the shares are already trading within 2.2% of Equifax’s offer price, it seems investors would be better off looking elsewhere for market-beating investment prospects.
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