Civica 's board has recommended a cash offer of 270p a share in a private-equity backed management buy-out (MBO). The deal represents a 34 per cent premium to Thursday's closing share price, but is below the shares' 12-month high of 277p, reached last July when Civica announced it was in bid talks.
Civica management's attempt to complete a similar deal . The offer from Cornwall Bidco, backed by 3i with a minority stake held by Civica's chief executive and finance director, already has 41.5 per cent acceptances. Analysts at Landsbanki say the deal is "highly likely to go through".
"In terms of price the exit multiple is modest," says ABN Amro analyst Charles Brennan; the deal values Civica at 12 to 13 times 2008's earnings forecasts. "However, shareholders can have few complaints - they have been given ample warning of management's view of valuation."
This deal follows the takeover of Northgate Information Solutions, another public sector IT services provider, by private equity group KKR, which completed earlier this month. Mr Brennan adds that he sees Civica and Northgate as a "compelling combination" and the deal may trigger sector consolidation.
But shares in Anite, another large player in the public sector IT market, barely moved in response to this announcement. Civica's MBO "throws Anite's lack of progress in selling its local authority division into sharp relief", says Panmure Gordon analyst George O'Connor, who adds that industry rumours of potential bids for Anite from trade and venture capital buyers failed to materialise.
"Anite has had trouble finding a buyer but the read across from Civica is clearly sinner heal thyself'," says Mr O'Connor. He rates Anite, which trades on 8.6 times his forecasts, as a 'hold', noting this week's profit warning from Anritsu, a rival to Anite's wireless testing business.
Kevin Ashton at Landsbanki is more charitable, suggesting Civica's takeout multiple would add 3p to his Anite price target, and implies a value of 72p for the group. "There is clear interest in an area that is both undervalued and has solid long-term prospects," he says.
