Rather than ashes, Phoenix IT (PNX) hopes to rise from a field of daisies. The board of the embattled IT services group has recommended that its shareholders accept a cash offer from corporate IT and telecoms group Daisy - which was taken private in January - and asset manager Toscafund. The pair have offered 160p in cash per share, valuing Phoenix at about £135m. The shares rocketed on the news, and now change hands for 156p, up from 129p before the announcement.
The deal would combine Phoenix IT's nationwide presence, big customer base and expertise in IT services with Daisy's telecom services. Daisy's strategy has centred on making acquisitions to broaden its product range. It expects the tie-up with Phoenix to create the first "truly converged" provider of IT and communication services to the UK mid-market. Phoenix IT's management also believe that bundling services such as fixed-line and mobile telephony, data and cloud hosting will attract customers.
Daisy may be getting a bargain by pouncing halfway through Phoenix IT's extensive restructuring programme. The offer values the group at 18 times N+1 Singer's forecast EPS of 9.1p for the current financial year.
Phoenix boss Steve Vaughan has fought to stem sharp declines in sales, profits and orders. His fairly orthodox solution has been to focus on meeting customers' needs, offering a superior service and cutting costs. He has also encouraged cross-selling between the managed services and business continuity divisions.
A bullish full-year trading update suggested the strategy was paying off. Phoenix IT renewed a long-term contract with key customer Costain spanning service desk and field support, data storage and cloud services. Its business continuity division inked deals with online retailer Shop Direct and soft drinks manufacturer AG Barr. And its cross-selling efforts helped it land a five-year deal with Aggreko for services from both divisions.
