Northgate gets another bid approach

Yesterday Northgate Information Solutions announced that it had received another Private Equity backed bid approach which they 'hoped' would be for around 100p per share/£580m.

You can read more in today's FT article. Click here.

Readers might have a feeling of deja vu. It was only a year back - in Oct 06 - that Northgate had a similar PE-backed bid. At that time Northgate's shares were 95p and (to quote the FT of 4th Oct 06) "Bridgewell thought a bid price of up to 115p was "justifiable and accordingly we retain our overweight stance. ""

How different now. Earlier yesterday "Northgate shares had dropped by a fifth to a four year low of 46.5p after bearish notes by Morgan stanley and Numis earlier in the day". After the inevitable bid-induced rally Northgate closed at 71p - a far cry from the 100p bid target and, indeed, the realistic hopes of just a year back.

It's all down to debt. After the £250m Arinso purchase, Northgate has net debt of £415m. That's not a comfortable place to be in the 'credit crunch' markets of today.

Having said that, we have admiration for what Chris Stone has done with Northgate. He told me several years ago that his ambition was to take Northgate into the FTSE100. He's still a long, long way off that, but he did 'go for it'. Something that few other UK SITS companies seem willing to do nowadays. Whatever happens to Northgate, Stone should have a very bright future.