Baring Private Equity Asia, which owns about 4.3 percent of Sydney-listed SAI Global, has offered to buy the whole company for about A$1 billion ($762 million; €698 million), and has secured the unanimous recommendation of the Australian risk management firm’s directors, according to a statement released on 25 September.
SAI sells products and services that help companies manage risk, providing risk management software, assessment, certification, testing and audits to clients across Europe, North America, and Asia.
Baring Asia, which owns about 9.25 million SAI shares, made a A$4.75 per share all-cash offer for the company, a 32.3 percent premium to SAI’s last closing share price of A$3.59 on 23 September. The transaction, subject to shareholder and Australia Foreign Investment Review Board approval, implies an enterprise value of A$1.2 billion for SAI, and an EBITDA multiple of 9.4x for the financial year ended 30 June 2016, according to a joint statement.
SAI closed 0.4 percent higher at A$4.64 on Tuesday, below Baring Asia’s A$4.75 per share bid, which suggests that the market expects shareholders to accept the buyout firm’s offer. If it does, the SAI acquisition will be Baring Asia’s second big-ticket transaction this year; in July, the firm partnered with Canadian private equity firm Onex Corporation to buy the intellectual property and science business of Thomson Reuters for $3.55 billion in cash. The SAI investment will be financed from Baring Private Equity Asia Fund VI, the firm’s $3.98 billion buyout vehicle, which invests in Asian companies, and also targets US and European-based businesses that are expanding in Asia.
Baring Asia is paying less than previous bidders have offered. Just two years ago SAI received a higher bid, valued at A$1.1 billion, from a consortium comprising buyout giant KKR and Sydney-based mid-market firm Pacific Equity Partners, the largest private equity fund in Australasia by funds under advisement.
The KKR-PEP bid fell through in September 2014, as the two firms never made a final offer for SAI. SAI said in a statement that talks ended because the bidders couldn’t determine the value of a key publishing contract with a major client, Standards Australia, the Wall Street Journal reported on 16 September. This contract with Standards Australia – an independent non-profit that sets safety and compliance standards for industries ranging from construction to information technology – was due to be renegotiated in 2018, and bidders were concerned that SAI would receive terms that were less lucrative, the Wall Street Journal reported two days earlier.
While no offers were made for SAI as a whole, some bidders were interested in parts of the company, SAI said at the time. More recently, SAI announced it is selling its quality assurance arm, which could fetch as much as A$400 million.
SAI's sale of its quality assurance unit is part of its plan to refocus its business on risk management solutions. According to media reports, interested buyers include London-headquartered product testing company Intertek and Paris-based testing and certification firm Bureau Veritas.
Baring Asia said in a statement that it would look to grow SAI’s business overseas. “[We will] further enhance SAI’s portfolio and expand its market presence globally”, said Jean Eric Salata, chief executive officer of Baring Asia.
A meeting with SAI shareholders is expected to be held in early December.
Credit Suisse was SAI’s advisor on the deal, while Baring was advised by Goldman Sachs and UBS.
Baring Asia has $10 billion in assets under management. It provides growth capital and also runs a private credit and a private equity real estate programme. In 2015 the firm raised the third largest pan-Asian private equity fund in the region, just behind the mega-funds raised by buyout giant KKR ($6 billion) and Asian investment firm RRJ Capital ($4.5 billion).