Kohlberg Kravis Roberts, the US private equity giant, has agreed to pay nearly 600m in cash to acquire Northgate Information Solutions, an offer deemed high enough to ward off any other interested parties.
Northgate, an outsourcing specialist that processes around one in three UK workers' salaries, revealed it was in talks with a suitor last week. Yet after a deal with an interested private equity buyer fell through last year, some observers were sceptical that a concrete deal would ensue.
The news that KKR has agreed a deal, and had already snapped up a 20 per cent stake in the company, set up financing and forged an agreement with Northgate's pension trustees, thus proved the doubters wrong.
The takeout price of 95p a share, valuing the company at 593m, was pitched at a 40 per cent premium to Northgate's share price even after it announced it was in bid talks. Numis Securities, which last week described the possibility of a deal being agreed at around 100p as "highly unlikely", said the KKR bid represented "an exceptionally good outcome for shareholders".
The likelihood of a counter-bid has been all but dismissed given the high valuation KKR has put on the company.
Lorne Daniel, an analyst at Arden Partners, said that management was unlikely to accept an offer much below the 90p level as it would have been a "tacit admission" that its "gamble" in acquiring Arinso, a Belgian HR outsourcing rival, earlier this year had failed.
Mr Daniel said that with Northgate being taken out and Xansa also being acquired earlier this year, the takeover spotlight will now fall on other assets in the public sector outsourcing space, most notably Civica and Anite.
He added that KKR's knockout bid had "made a nonsense" of concerns about public sector spending drying up and Northgate breaching its banking covenants.Reuse content