Class (ASX:CL1) share price explodes 60% on takeover news

A takeover proposal has launched the Class share price to a multiyear high.

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The Class Ltd (ASX: CL1) share price is rocketing higher on Monday morning. This move is amid the company entering a scheme arrangement to be acquired by HUB24 Ltd (ASX: HUB).

At the time of writing, the Class share price is trading 60.77% higher to $2.91. This puts the self-managed super fund (SMSF) administration solutions company’s shares at the highest level since early 2018.

Why is the Class share price rocketing higher today?

Investors are bidding up the Class share price on Monday morning following a takeover bid from HUB24. The offer from the $2.27 billion investment platform company represents a significant premium to its previous closing price on Friday afternoon.

According to the release, to acquire Class, HUB24 has offered 1 ordinary share for 11 ordinary Class shares. Additionally, the larger company will provide shareholders with 10 cents per ordinary share in cash to secure the acquisition. Shareholders can rest assured an interim dividend for FY22 of 2.5 cents per share has been declared on top of this payment.

Based on the closing price of HUB24 shares on 15 October, the consideration on offer implies a $3.11 Class share price. Similarly, the deal assigns a market capitalisation of $386 million to the SMSF solutions company.

The Class board has unanimously recommended shareholders vote in favour of the scheme. Unless the company receives a superior offer from another party. Furthermore, the board cited the potential for increased strength and technological innovation after merging with HUB24.

Management commentary

Commenting on the acquisition proposal, CEO and managing director Andrew Russell stated:

The combined strengths of Class and HUB24 will further accelerate the transformation of Class and provide exciting opportunities for future growth. We’re pleased Class will continue to run as a separate business unit within the HUB24 group so our team can continue to deliver on our strategy, whilst leveraging our deep technology expertise to deliver superior outcomes to both sets of customers.

From here, the deal will undergo 2 court hearings for reviewing the scheme booklet. If this progresses, the scheme is expected to be implemented mid to late February 2022.

Class in the past

Today’s jump breaks the downward trend that the Class share price had been experiencing over the last 12 months. Prior to today, the company’s shares had sunk approximately 16% over the last year.

Finally, the deal represents a 121% increase on the 52-week low recorded on the Class share price in May.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Hub24 Ltd. The Motley Fool Australia owns shares of and has recommended Class Limited. The Motley Fool Australia has recommended Hub24 Ltd. 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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