Vista Equity Partners offer for DH Corp. is fair, says Industrial Alliance

A competing bid could emerge for DH Corp. (DH Corp. Stock Quote, Chart, News: TSX:DH) but the current offer on the table is a fair one for shareholders, says Industrial Alliance Securities analyst Dylan Steuart.

This morning, DH Corp. announced that it had entered into a definitive arrangement that would see American private equity firm Vista Equity Partners acquire it for approximately $4.8-billion. The company said Vista intends to combine DH with another of its portfolio companies, United Kingdom-based Misys, which it described as “a leading global software provider for retail and corporate banking, lending, treasury and capital markets, investment management and enterprise risk.”

“The combination of DH and Misys creates a global leader in financial technology, with a broad array of products to serve customers,” said DH Corp. CEO Gerrard Schmid. “DH brings depth in North America and leadership in payments and lending, while Misys has a strong market position in Europe, the Middle East, Africa and Asia, and leadership capabilities in banking, capital markets, investment management and risk solutions. I believe this transaction is beneficial to our customers, shareholders and employees. We look forward to working closely with Vista and the leadership team at Misys to complete this transaction.”

Steuart says the deal makes sense from a strategic point of view and the price, which was a 36 per cent premium over the DH’s closing share price on December 5, 2016, which was the last trading day before the acquisition rumours surfaced, looks to be “fair value”. The analyst says the odds of this deal going through are good, but not a certainty.

“The shareholder vote is set for May 2017 and requires a 2/3rds majority to pass,” he notes. “Given the number of rumoured suitors for DH since the strategic review was announced in December, 2016 there remains the possibility of a superior bid to emerge. That said, given management’s recommendation, the strategic benefits and the fair offer price (in our view), the odds of this proposed transaction going through as is, looks to be favourable.”

In a research update to clients today, Steuart moved his recommendation on DH Corp. from “Hold” to “Tender”. His most recent share price target on the stock was $25.50, which is equal to the price Vista proposes to pay.