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Morgan Stanley’s offer for Solium Capital is fair, Haywood says

Haywood Securities analyst Pardeep Sangha says Morgan Stanley’s proposed purchase of Solium Capital (Solium Capital Stock Quote, Chart TSX:SUM) is a fair deal for the latter’s shareholders.

This morning, Solium Capital announced it had entered into a definitive arrangement agreement with Morgan Stanley under which Morgan Stanley, through a wholly owned subsidiary, would acquire SUM, subject to shareholder approval.

The proposal, which would see Morgan Stanley acquire Solium for approximately $1.1-billion, or $19.15 a share, has the unanimous approval of the company’s board.

Sangha, noting that the acquisition price represents a 43 per cent premium to SUM’s recent closing price, says the deal makes sense.

“The transaction price represents approximately 5x EV/Revenue and 20x EV/EBITDA of CY20 estimates,” he notes. We view Morgan Stanley’s bid as a fair offer and we are not expecting any competing bids given the premium being offered and the nature of the business relationship between Solium and Morgan Stanley.”

In a research update to clients today, Sangha changed his recommendation on Solium Capital from “Buy” to “Tender” and raised his one-year price target on the stock from $17.00 to $19.15.

Sangha had modeled Adjusted EBITDA of $16.6-million on revenue of $109.7-million in 2018 for Solium. He expects those numbers will improve to EBITDA of $31.7-million on a topline of $137.3-million the following year.

Solium Capital is the sixth component of analyst Sangha’s coverage universe to be acquired, joining QHR, Tio Networks, Apivio Systems, Cortex Business Solutions and Avigilon.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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