Why the Nitro share price is leaping 18% on Monday

The software maker is enjoying attention from multiple takeover suitors, but believes it has now found 'The One'.

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The Nitro Software Ltd (ASX: NTO) share price is spiking 17.9% higher in early Monday trade after investors digested a new takeover offer.

The stock has been in a trading halt since Thursday afternoon when it closed the session at $1.73. After the freeze was lifted on Monday morning, Nitro shares flew as high as $2.05.

After private bidder Potentia Capital made its second takeover bid of $1.80 per share on Friday, the Nitro board on Monday morning was forced to reveal that Canadian graphics software company Alludo has submitted a superior proposal for a 100% acquisition at $2 per share.

"Alludo has also indicated it is willing to proceed with an off-market takeover bid with a 50.1% minimum acceptance condition, offering $2.00 cash per share."

Not surprisingly, the Nitro board recommended shareholders reject the Potentia bid.

The announcement to the ASX also revealed Alludo had already performed considerable due diligence and the remaining work was "confirmatory".

"In order to explore whether a definitive transaction can be agreed, Nitro and Alludo have entered into a Process Deed, pursuant to which Nitro has granted Alludo a 21-day period of exclusivity for the purposes of confirmatory due diligence and negotiation of definitive agreements."

Once this formality is done, the Nitro board said it would recommend shareholders accept the Alludo takeover.

Potentia jilted, but will it respond? 

The development is sure to ruffle Potentia, which had been courting Nitro since August but was blocked from due diligence access.

Back on 31 August, the Nitro board rejected a $1.58 per share takeover offer from a Potentia consortium. Since then Potentia had bought up 19.8% of Nitro's shares.

Then on Friday, Potentia made an unsolicited takeover bid at $1.80 per share.

While shareholders will get a chance to accept or reject that offer in about a fortnight, the Nitro board recommended declining.

"Following careful consideration, including advice from its external advisers, the Nitro Board has concluded the Potentia Takeover Bid undervalues Nitro and unanimously rejects the Potentia Takeover Bid as not being in the best interests of shareholders."

The Nitro board pointed out that Alludo's $2 deal was 11% higher than Potentia's bid, a 77% premium on the undisturbed share price of $1.13, and 69% higher than the volume-weighted average price to 29 August.

Investors will be keenly watching to see if there will be any counteroffers from Potentia to outbid Alludo.

Motley Fool contributor Tony Yoo has positions in Nitro Software Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nitro Software Limited. 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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