$6.00 a share is fair for Converge Technology Solutions, Ventum says

The new go-private price for Converge Technology Solutions (Converge Technology Solutions Stock Quote, Chart, News, Analysts, Financials TSX:CTS) is $6.00 and Ventum Capital Markets analyst Rob Goff thinks that is fair.

On April 2, Converge reported that, owing to a competitive bid, H.I.G. Capital had agreed to raise its bid on CTS from $5.50 to $6.00 per share, even though a $6.10 bid ultimately resulted.

“After carefully considering the amended binding proposal and the amendment, the board unanimously (with an interested director abstaining), upon the recommendation of the special committee, and in consultation with its legal and financial advisers, determined that entering into the amendment was in the best interests of the company,” the company said. “In making its determination, the board and the special committee considered, among other things: (i) that the amendment offers shareholders of the company a high degree of certainty of a completed transaction on a very short timeline at a price per common share that is significantly higher than the original $5.50 price under the arrangement and equal to the price offered under the original binding proposal; and (ii) the benefits of such relative certainty to the business and the company’s stakeholders, including its employees, customers and vendors. As part of entering into the amendment, the company and HIG have also agreed to permanently discontinue the court proceedings described above, and the company has agreed to discontinue its discussions with the third party. The board unanimously (with an interested director abstaining) reiterates its recommendation that shareholders vote for the arrangement resolution (as defined herein).”

Goff said this is a good result for shareholders.

“With the increased bid, we continue to believe that the Converge take-out represents a compelling analog to the Company’s close industry peers, Alithya (ALYA-TSX, BUY, PT C$2.50) and Calian (CGY-TSX, BUY, PT C$68.00) which we view as attractive opportunities in the IT Services space,” he wrote. “ALYA and CGY trade at 4.8x/2.8x and 5.8x/4.8x 2025/2026 EV/EBITDA estimates (consensus), respectively. We highlight the median 2025/26 EV/EBITDA valuations for CTS’ US and European peers at 8.7x/6.8x and 7.7x/6.0x.”

In a research update to clients April 3, Goff maintained his “Tender” rating and raised his price target from $5.50 to $6.00.