Geotab offer is the best case scenario for BSM Technologies, Beacon says

BSM Technologies (BSM Technologies Stock Quote, Chart TSX:GPS) investors should gladly take the $1.40 per shares offer from Geotab, Beacon Securities analyst Gabriel Leung says.

This morning, BSM announced that Ontario-based vehicle tracking firm Geotab had offered $1.40 per share for the former, in a friendly deal that has unanimous approval from BSM’s board.

“Following the announcement of our expanded partnership with Geotab in late 2018, it became clear that BSM’s growing analytics and optimization capabilities, combined with Geotab’s best-in-class telematics solution, results in an enhanced product offering to fleet management customers. As part of the Geotab team, we will be able to offer these enhanced capabilities across all of Geotab’s partner network,” BSM CEO Louis De Jong said. “Geotab’s all-cash offer not only provides liquidity at a significant premium for BSM shareholders but it is also a great outcome for our employees and our customers.”

Leung this morning noted that this offer represents a 41 per cent premium to Friday’s closing price, says this is the best case scenario for BSM, as it was effectively becoming a Geotab reseller.

“Given this deep partnership (and potential subscriber conversion funnel), we believe GeoTab was a natural acquirer,” the analyst says. “We also believe this deep relationship could potentially dissuade potential acquirers from coming over the top with a superior offer. Given the aforementioned points (notably the GeoTab relationship and potential volatility around BSM’s near-to-mid term results) we view this bid is the best case scenario for BSM and recommend that investors Tender to the offer.

As part of his rating change to “Tender” from “Hold”, Leung today also raised his one-year price target on BSM from $1.25 to $1.40.

Leung thinks BSM will post EBITDA of $5.7-million on revenue of $40.0-million in fiscal 2019.