The Smartgroup Corporation Ltd (ASX: SIQ) share price is starting the week deep in the red.
At the time of writing, the fleet management and salary packaging company’s shares are down almost 16% to $7.88.
Why is the Smartgroup share price crashing lower?
Investors have been selling down the Smartgroup share price this morning after it released an update on a takeover approach.
Last month the company received a non-binding, indicative and conditional proposal from a consortium comprising TPG Global and Potentia Capital to acquire the company for $10.35 per share. This offer was enough for Smartgroup to grant the consortium a period of due diligence.
Unfortunately, it appears as though the consortium hasn’t seen enough during its due diligence to support a takeover approach.
According to the release, the consortium has informed Smartgroup that it does not intend to proceed with the proposal at $10.35 per share. As a result, discussions with the consortium in relation to the proposal have now ceased and the exclusivity provisions have terminated.
However, that’s not the end of the story.
The release explains that the consortium has expressed an interest in proceeding with a revised proposal of $9.25 per share in cash. This is 10.6% lower than the previous offer.
Management notes that the new offer would still be a 17.7% premium to the closing Smartgroup share price on 28 September. This compares to the 31.7% premium of the previous offer.
But this hasn’t been enough for the Smartgroup Board. Having received the new offer over the weekend, the Board has unanimously concluded not to proceed with discussions at this price.
Instead, the company intends to continue to focus on the delivery of sustained earnings and dividend growth for shareholders. It also advised that it is currently on track to deliver a calendar year 2021 financial performance in line with consensus expectations.