Smartgroup (ASX:SIQ) share price soars 17% on TPG Global takeover bid

The acquisition trail continues on the ASX this year, with Smartgroup now a target.

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The Smartgroup Corporation Ltd (ASX: SIQ) share price has jumped out of the starting blocks from the opening of trade this morning and now trades at $9.15.

Shares in the employee management services provider are edging higher after it revealed a consortium of investors put forward a proposal to acquire the company.

Here’s what we know.

Smartgroup receives offer of acquisition from investor group

Smartrgoup advised a consortium of investor groups had put forward an “indicative, non-binding and conditional proposal to acquire 100% of the shares in Smartgroup”.

The consortium is made up of US-based investment firm TPG Global, LLC, and Australian private equity investor Potential Capital.

Pension fund Aware Super is also in on the deal, providing trustee services, according to the company’s announcement.

Together, the consortium’s proposal is an all-cash consideration of $10.35 per Smartgroup share.

This represents a 32% premium to the Smartgroup opening share price on Wednesday but just an 11.5% premium to what it’s trading at now.

That price is also a 38.6% premium to “the 90-day volume-weighted average price of Smartgroup shares up until Tuesday 28 September”.

What’s interesting is that, under the scheme, “any franking credits attached to a dividend or capital return would be received by Smartgroup shareholders in addition to the proposed scheme consideration”.

Even still, the proposal is subject to a number of considerations including due diligence and final approval from Smatgroup’s board.

As such, Smartgroup has granted the consortium 4 weeks of due diligence by “opening the data room over the next week” to see if the parties can strike a deal.

Smartgroup’s board unanimously recommended that shareholders vote in favour of the proposal and has appointed an independent expert to see if the deal is a good fit for shareholders.

If successful, the deal would see Smartgroup de-list from the ASX as a private entity. Investors want a piece of the action and are driving the Smartgroup share price higher on the day. It jumped 20% at market open this morning before settling around 17% higher.

Smartgroup share price snapshot

After lagging the S&P/ASX 200 Index (ASX: XJO)’s return since 2019, the Smartgroup share price has climbed 38% this year to date and a further 59% over the past 12 months.

Both of these returns have outpaced the broad Index’s return of around 25% in this time.

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended SMARTGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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