- Unikmind edges up cash offer for Kape Technologies
- Majority shareholder controls 67.15 per cent of shares
- Offer needs 2.85 per cent more acceptances to be declared unconditional
Cyber security software provider Kape Technologies (KAPE: 288p) has received an increased and final cash offer of $3.60 (290p) from majority shareholder Unikmind, a company wholly owned by Teddy Sagi, the founder of gaming software group Playtech (PTEC). It values Kape’s equity at $1.58bn (£1.27bn) and on an enterprise valuation of $1.7bn.
Unikmind’s original offer of $3.44 per share only received acceptances from 0.03 per cent of shareholders, leaving Unikmind – which holds a 54.2 per cent stake – well short of the 75 per cent support it needs to force a delisting of the shares. The new offer has garnered support from shareholders controlling almost 13 per cent of the shares in issue, effectively giving Unikmind control of 67.15 per cent.
Although the independent directors believe that the intrinsic value of Kape is higher than the level of the revised offer, they note that in the event of a delisting then minority shareholders would not be afforded the same level of protection as they are currently and the liquidity, marketability and realisable value of their shares would be negatively impacted, too. As a result, they believe that in the event of Unikmind obtaining sufficient voting rights then “Kape shareholders would have to seriously consider accepting the revised offer”. It is for these reasons that one of the independent directors, Dan Pomerantz, who has a 5.97 per cent holding, has undertaken to accept the new offer.
In their response to the revised offer, the independent directors also note that they have explored alternatives to realise greater value for shareholders, but no firm proposal from third parties has been received. One of the stumbling blocks is undoubtedly the fact that any third-party offer would require approval from Unikmind. There would be no certainty of that being forthcoming.
The final offer will initially remain open for acceptances until 1pm on 5 May 2023, but Unikmind now only requires additional acceptances from holders of 12.2mn shares, representing 2.85 per cent of the shares in issue, to declare it unconditional.
Unfortunately, I feel that enough of Kape’s minority shareholders will now reluctantly support the low-ball offer even though it falls well shy of what I consider to be a fair and reasonable exit price (‘Why Kape Technologies' buyout offer is easy to refuse’, 1 February 2023). The revised offer values Kape on an enterprise valuation of $1.7bn, or less than 10 times cash profit in 2022 and 10.3 times forecast free cash flow for the current year. To put the offer into some perspective, rival Avast was acquired by NortonLifeLock on 19 times cash profit to enterprise valuation, or almost double the multiple Unikmind is offering to buy out Kape’s shareholders.
The holding has delivered a 512 per cent total return on the entry price in my market-beating 2017 Bargain Shares Portfolio, but the tactics used by Unikmind to try to force acceptance of its offer are unpalatable. Reluctantly I would accept the final offer.
