Shares in Autonomy soared by more than 70 per cent yesterday after the surprise news that it had accepted a £7bn takeover offer from Hewlett-Packard. Analysts believe that, despite the "very generous offer", a bidding war could break out.
The Cambridge-based company, which specialises in software that tracks voice calls and emails, confirmed it was in bid talks with HP on Thursday evening after the markets closed.
The stock was the only FTSE 100 member to make it into positive territory yesterday morning as it stormed up from 1,546p to hit the 2,550p-per-share cash offer price, although it closed at 2,452p.
Gerardus Vos, an analyst at Investec, said: "We see this deal as HP playing catch-up in the 'big-data' arena, where we have seen a rapid consolidation by IBM, Oracle, EMC and Adobe."
Despite the bid's 80 per cent premium to Autonomy's closing price the previous night, Mr Vos predicted that a counter-bid could emerge because Autonomy "has one of the strongest intellectual property sets in enterprise information management and this would be difficult to replicate for other 'big-data' players".
Beyond the potential interest from IBM and Oracle, another potential bidder is SAP, which is "becoming more interested in infrastructure assets," Mr Vos explained, saying: "We believe that any offer would need the approval of [Autonomy's founder and chief executive] Mike Lynch, and thus cultural fit could be an issue."
Other analysts agreed Autonomy's position in the unstructured data market and its unique technology made it hugely coveted. Vijay Anand, an analyst at Execution Noble, said the deal was "not just about synergies but about acquiring a strategic asset". He added: "There is potential of a bidding war as Autonomy's technology also has relevance to other IT giants such as Oracle, IBM and Microsoft."
HP's share price did not fare as well as its target's yesterday, slumping by more than 20 per cent. Paul Morland, at Peel Hunt, called it a "remarkably generous offer" and said it was about three times as much as the company would have cost three years ago. "We doubt it is the answer to HP's strategic problems, and we do not expect IBM and Microsoft to be quaking in their boots," he added. Autonomy would be run as a separate business within HP led by Mike Lynch, who will report directly to Leo Apotheker, the head of HP.
Rajeev Bahl, the co-head of research at Matrix, said HP's offer was a "rich valuation for Autonomy on a standalone basis," adding it was a "good outcome" for the UK company's investors. He was less convinced that a counterbidder would emerge "given the valuation being paid". However, Tintin Stormont, of Singer Capital Markets, said a counterbid "cannot be ruled out, particularly if it is seen to prevent HP from executing a strategy that could alter the competitive landscape.
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