AIM-listed comms and tech outfit Daisy Group Tuesday confirmed that the previously agreed 185 pence-per-share bid from a consortium led by CEO Matthew Riley has been declared unconditional.
The offer from Riley, Penta Capital, and long-term investor Tosca Fund, which values Daisy at near £500m, was agreed in October, some months after the trio first made advances to the Group.
The buyers already owned 51.5 per cent of Daisy stock, but via new investment vehicle Chain Bidco have now acquired or received valid acceptances to acquire shares, taking their stake to over 97 per cent.
In line with the Companies Act, Bidco will exercise its right to hoover up the remaining stock, and intends to apply to the London Stock Exchange for the cancellation of its listing on AIM.
“Bidco anticipates that cancellation of listing and trading will take place no earlier than 20 January,” Daisy stated in a stock market filing.
The deal is financed in part by a £135m payment-in-kind loan and £265m in senior banking facilities, and equates to a valuation of £494m, or about nine times Daisy’s adjusted earnings before income tax, depreciation and amortisation (EBITDA) of £57.9m for fiscal 2014.
Daisy Communications was founded by Riley in 2001 and bought 24 firms before merging with web hosting and network service provider Vialtus in 2009. The pair then reversed into AIM-listed Freedom4 with shares trading at 80 pence each. Tosca Fund was an investor from this time.
In the last five years Daisy has built a reputation as a serial acquirer. Despite this - and the EBITDA number that acquisitive companies like to use as a metric of growth - profits have not shown up to the party.
In the twelve months ended 31 March, Daisy reported a net loss before tax of £24.4m, versus a net loss of £23.5m a year earlier, although an income tax credit of £8.7m helped soften the net loss to £15.6m.
During the first three months of fiscal 2015, sales came in flat at £84.7m, the EBITDA was £12.2m (compared with £13.4m in the prior year), but the operating loss narrowed to £5.2m from £6m. Net loss was £5.6m against £5m.
So what’s next for the business?
The market of small- and medium-sized comms and data providers remains fragmented so there remains an opportunity to roll out complimentary businesses.
The consortium already stated when the offer was first accepted by Daisy in October that to maintain top line expansion, it will look to make chunkier acquisitions.
This is likely to take more time and be more risky for shareholders, so it is perhaps better for the group to do this as a private rather than public entity. At least, that is the corporate thought process. ®