IT services company 2e2, which has been owned by UK private equity group Duke Street Capital since 2006, has announced a cash offer for AIM-listed networking company, Netstore, worth £58 million (€78 million; $110 million) or 32 pence per share.
The take-private deal is Duke Street’s second for 2e2, having taken Compel from AIM for £53 million in March 2007. Duke Street bought 2e2 in 2006 for £130 million.
In June, research from UK investment bank Noble Group suggested that as public markets suffered, cash rich AIM-listed companies with large strategic shareholdings would prove tempting targets for private equity buyers.
This is because these companies tend to carry less debt than their main market counterparts and offer strong growth potential.
Earlier this year Close Brothers Corporate Finance pointed out the significant number of technology companies being taken private in the UK, citing the falling stock prices and major liquidity issues as problems driving the trend.
John Harper, partner at Duke Street Capital, told PEO: “IT sector M&A has remained pretty buoyant, driven largely by a need for consolidation. Scale is increasingly important as customers want fewer, bigger suppliers.
“Sector valuation has been hit hard despite generally good news flow, so listed IT companies make attractive targets,” he said.
The Netstore share price jumped from 17.5 pence to 23.5 pence in February when initial reports of an offer were made. Yesterday morning’s offer of 32 pence represents a premium of 78 percent on the February share price.
The acquisition was made on behalf of Duke Street's €963 million fund, Duke Street VI.