Smartgroup (ASX:SIQ) share price crashes 16% amid takeover collapse

The Smartgroup takeover is off…

| More on:
woman looks shocked at mobile phone

Image source: Getty Images

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.

What’s happening?

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.

Should you invest $1,000 in Smartgroup right now?

Before you consider Smartgroup, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Smartgroup wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor James Mickleboro has no position 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.

More on Share Fallers