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Praemium (ASX:PPS) share price edges lower on compulsory takeover news

asx 200 share takeover represented by man drawing illustration of big fish eating little fish
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The Praemium Ltd (ASX: PPS) share price has edged 1.85% lower to 53 cents at the time of writing after opening today’s session higher at 55 cents. The movement in the Praemium share price came after the company announced a compulsory takeover of the shares in Powerwrap Ltd (ASX: PWL) that it did not already own. The Powerwrap share price was down 1.49% to 33 cents at the time of writing. 

How will the  takeover be carried out?

Praemium previously made a bid on 22 July 2020 for all outstanding Powerwrap shares that it did not already own. The offer was one Praemium share for every two Powerwrap shares held in addition to 7.5 cents in cash for every Powerwrap share held. The offer is scheduled to close today at 7pm Melbourne time.

Praemium now owns 92.31% of Powerwrap shares. Given that it owns more than 90% of Powerwrap, Praemium intends to make a compulsory acquisition for all remaining Powerwrap shares. The compulsory acquisition will take place on the same terms as the original offer. Praemium is being advised by Deloitte and Nicholson Ryan lawyers.

Powerwrap provides wealth management platform technology to advisors, wealth managers and brokers. 

Praemium’s pro forma net profit for the year to 30 June 2020 when taking into account the merged group is $414,000. Pro forma revenue for the merged group at 30 June 2020 is $70.29 million compared to $51.24 million for Praemium prior to the takeover.

At current prices, shareholders now considering purchasing Praemium shares can theoretically purchase them at a small discount by buying shares in Powerwrap, however, this may be affected by tax implications.

About the Praemium share price

Praemium provides investment platform technology to advisors, institutions, stockbrokers, dealer groups and investment managers. It has been listed on the ASX since 2006.

In the year to 30 June 2020, Praemium had a 26% increase in funds under administration, which rose to $20.3 billion. Revenue was up 14% to $51.2 million in the year to 30 June 2020 and net profit after tax increased 91% to $4.9 million. Praemium’s earnings before interest, tax, depreciation and amortisation (EBITDA) were up 25% to $14.2 million in the year to 30 June 2020.

The Praemium share price is up 178.95% since its 52-week low of 19 cents, it is up 3.92% since the beginning of the year. The Praemium share price is up 8.16% since this time last year.

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Chris Chitty 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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