The board of Nearmap (ASX: NEA) has unanimously recommended shareholders vote in favour of a $1.055 billion private equity bid for the company, assuming no higher offer is received, and the deal gains the approval of an independent expert.
The aerial imaging company announced the indicative $2.10-per-share scheme of arrangement bid from US software sector specialist Thoma Bravo on 15 August. Nearmap received the offer on 6 July.
On 22 August, Nearmap chairman Peter James said: “The board has carefully considered the advantages and disadvantages of the proposed scheme and believes the offer price of $2.10 cash per share provides shareholders with certainty of value today for the potential of our business. Nearmap has achieved considerable success to date in Australian and North America and while, in the long-term, there remains potential future growth trajectory, this has to be balanced with the business and market risks that Nearmap shareholders face remaining as a publicly listed, independent, company.”
Thoma Bravo senior partner A.J. Rohde said: “We believe Nearmap’s insights are increasingly mission-critical to enterprises and the use cases rapidly evolving, as evidenced by the company’s accelerating adoption with blue-chip customers in North America.”
Nearmap chief executive Rob Newman said: “We expect the location intelligence and aerial imaging market in North America to undergo change and consolidation over the next few years, which will present organic and inorganic opportunities for Nearmap. I look forward to our team’s continued outstanding work in support of our customers and eagerness to build on our success benefiting from the operating capabilities, capital support, and deep sector expertise from Thoma Bravo.”
In its results announcement on 17 August, Nearmap said its 2022 financial year revenue had surged 28% to $146.8 million on the back of strong growth in the North American market.
The company said its annual contract value (ACV) had reached $159.9 million by the end of the 2022 financial year. This was at the upper end of its guidance of $150 million to $160 million for the year.
Despite the strong increases in revenue and ACV, Nearmap reported a statutory after-tax loss for the year of $30.8 million.
This was a substantially higher loss than the prior year’s $18.8 million however it included litigation costs associated with its defence against legal action by US rival EagleView which alleges Nearmap has infringed one of its patents. The legal action is ongoing.
When it announced Thoma Bravo’s offer on 15 August, Nearmap said it represented an 83% premium to the company’s closing share price of $1.15 on the day before it received the offer; a 67% premium to its six-month volume-weighted average price of $1.26 to Friday 12 August, the last trading day before the announcement, and a 39% premium to Nearmap’s closing price of $1.51 on Friday 12 August.
Nearmap said, prior to Thoma Bravo’s offer, it had received other offers which its board had considered inadequate.
In granting Thoma Bravo exclusive due diligence for seven days with facility for extension, Nearmap agreed to a break fee of up to $US3 million if it decided to accept an alternative offer during the exclusivity period or within six months after.
A definitive agreement would not be subject to financing but would be subject to Foreign Investment Review Board (FIRB) approval, clearance in the US under the Hart-Scott Rodino Act and other customary terms and conditions.
Nearmap is taking financial advice on the acquisition proposal from Citgroup Global Markets Australia and legal advice from DLA Piper Australia.
Nearmap shares rose more than 25% from $1.51 to $1.89 following the announcement of Thoma Bravo’s bid. Following the results announcement, the shares rose further to around $2. The announcement of the board recommendation then lifted the price a further to $2.07. This was, however, still well below the peak of $3.79 reached in 2019 and even last year’s highs of around $2.20.
Thoma Bravo is a long-established private equity firm; it pioneered buy-to-build strategies in the US market 40 years ago and more recently became one of the first private equity firms to specialise in the software industry.
Thoma Bravo acquired a majority stake in Microsoft-based tools software company Nintex in 2018. Nintex was founded in Melbourne in 2006 and attracted investment from Macquarie Capital and US private equity firms TA Associates and Updata Partners prior to Thoma Brava entering its share register. By the time Thoma Bravo invested, Nintex had its headquarters in Bellvue, Washington.
Image: Nearmap chief executive Rob Newman.