No deal! Why this ASX 200 stock is falling today

Bain Capital won't be taking this stock private for just $4.00 per share.

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Insignia Financial Ltd (ASX: IFL) shares are having a poor start to the day.

In morning trade, the ASX 200 stock is down over 2% to $3.52.

This compares unfavourably to a small gain by the benchmark S&P/ASX 200 Index (ASX: XJO) on Wednesday.

A man stands with his arms crossed in an X shape.

Image source: Getty Images

Why is this ASX 200 stock sinking?

Insignia Financial is a leading Australian wealth manager providing financial advice, superannuation, wrap platforms, and asset management services to members, financial advisers, and corporate employers.

Last week, the company revealed that it had received a confidential, preliminary, non-binding, and indicative proposal from private equity firm Bain Capital to acquire it by way of a scheme of arrangement.

Under the terms of the indicative proposal, the ASX 200 stock's shareholders would receive $4.00 cash per share. This would be adjusted for any dividends paid or payable after the date of the proposal.

This offer represented a 17.6% premium and valued the company at approximately $2.68 billion.

In response to the offer, the ASX 200 stock's board advised that, together with its financial and legal advisers, it would consider the indicative proposal to assess whether it was in the best interests of shareholders to engage further with Bain Capital.

It also warned that there was no certainty that the indicative proposal will result in a binding offer or that any transaction will eventuate.

Takeover update

This morning, Insignia Financial provided the market with an update on the takeover offer. The company revealed that it has carefully considered the terms of the indicative proposal and has bad news for Bain Capital.

According to the release, the Insignia Financial board has said thank you but no thank you. It doesn't believe that the offer is good enough nor in the best interests of shareholders. It said:

The Insignia Financial Board believes that, based on its view of the fundamental value of Insignia Financial, the Proposed Transaction does not adequately represent fair value for IFL shareholders in the context of a change of control transaction and that it is not in the best interests of IFL shareholders to engage with Bain Capital in relation to the Indicative Proposal.

There is no word out of the Bain Capital camp at this stage. But it seems unlikely that the private equity firm's first offer was its best offer. So don't be surprised if it returns in the new year with an improved offer. This may explain why the ASX 200 stock is falling further today.

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 has no position in any of the stocks mentioned. 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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