Praemium share price falls despite Powerwrap acceptance of offer

The Praemium share price is falling today as Powerwrap released notice urging its shareholders to accept Praemium’s takeover offer.

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The Praemium Ltd (ASX: PPS) share price is falling today despite news out of Powerwrap Ltd (ASX: PWL) that it will accept Praemium’s latest takeover offer. The Praemium share price is currently trading 4.67% lower to 51 cents.

The decrease in share price is likely to be as a result of the heavily falling All Ordinaries Index (ASX: XAO) more broadly.

A closer look at Praemium and Powerwrap

Praemium is global provider of technology platforms for managed accounts, investment administration and financial planning. Its fully integrated account management platform is suitable for both small and large account holders, enabling clients to see all their portfolios in one place.

Powerwrap, simply put, is a smaller version of Praemium and in the past has acted as a smaller rival. Powerwrap is also involved in development and execution of investment portfolio administration services.

What happened

The takeover bid of Powerwrap first came to light in early July as Praemium placed an offer for their longstanding partner and competitor. The companies initially entered into a bid implementation agreement, under which Praemium would make an off-market conditional takeover bid for all of the Powerwrap shares it does not presently hold.

However despite the Powerwrap board of directors unanimously deciding that its shareholders should accept the offer, powerful players stood against the offer. A pair of ‘Rich Listers’ and other Melbourne players teamed up to try to get Praemium to increase its bid for their smaller wealth platform play, Powerwrap. They were ultimately unsuccessful, which meant that the offer stood at 7.5 cents per Powerwrap share in cash and 1 Praemium share for every 2 Powerwrap shares. 

Two days ago, the offer went unconditional.

What now?

With the offer to be concluded on 21 September, Powerwrap’s directors are urging shareholders to accept the offer as quickly as possible.

Praemium already controls 56.01% of the company and thus has the majority of votes at any general meeting of Powerwrap shareholders. However, it must be noted that it needs 75% if it is to continue with its plans to delist Powerwrap.

The Powerwrap share price is currently trading 4.67% lower, with it having made no gain or loss overall this year.

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Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Praemium Limited. The Motley Fool Australia has recommended Praemium Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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