Monday, 24 March 2008

Tietoenator gets a bid approach from private equity

Finnish IT services company, Tietoenator has received a bid for Euro1.1b from Cidron Services Oy which is indirectly owned by private equity group - Nordic Capital. Given that Tietoenator closed at Euro15.99 – higher than Euro15.50 the Nordic offer – clearly there are expectations of a counter bid. This equates to a PSR of c0.6.

Tietoenator had lost about half of its value in the last year – before the bid boosted its shares by 40%. A profits warning, the departure of its CEO in Oct 07 and its first ever quarterly loss didn’t help.

Cidron Services Oy owned 4.4% of Tieto before the offer. They had bought Tieto's Personec (body-shopping business) at the end of 2006 (€150m of revenues) and merged it with Tradimus (€200m revenues) to create a Nordic IT services and outsourcing business in areas like Finance and Logistics BPO and Payroll processing. They also bought part of Atos' Nordic business (Atos Medical, €35m 2006 revs.) which Atos sold to WM Data. Still swallowing Tieto will be a big investment relative to their others in the IT Services sector.

In some ways this bid is quite encouraging for the sector. Some had expected M&A – particularly PE-backed bids - to suffer in the current economic climate. Interestly, Capgemini and Atos Origin shares both rose on the news - two companies which seem to be the subject of constant M&A rumours. Indeed Centaurus is a hostile bidder at Atos Origin; having amassed a 20% stake. The only really significant PE backed deal in the European IT services sector in the last year was Apax' acquisition of GFI. Interestingly Apax valued GFI at €7 and today the stock trades at €3.5!

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