Software firm Iona Technologies is likely to approach a number of potential bidders for its business after its board appointed Lehman Brothers and Merrion Capital to assess a preliminary approach for the company from German firm Software.
Firms likely to be contacted by Iona's advisers in the near future include the Nasdaq-listed US operators Tibco and Progress Software, which operate in roughly the same market. It said its strategic alternatives included a sale of the business or a merger with another entity.
Shares in Iona closed 3.11 per cent stronger last night at €2.32, not far off the €2.37 level reached a fortnight ago when the share jumped 18 per cent after Iona notified the market of the approach from an unidentified suitor.
The valuation at which Software might bid for the business is not known. However, the fact that Iona has decided to open up the process to other possible suitors implies strongly that the company believes its current share price undervalues the business significantly.
The freefloat of Iona's shares on the Nasdaq and Dublin markets comprises almost 88 per cent of its stock. While last night's closing price implies a market capitalisation of €82.83 million or some $121.68 million, Iona's balance sheet held almost $56.5 million in cash and marketable securities at the end of last year. This means the current price values the business per se in the region of $65 million.
Iona is likely to argue that this is far from the true valuation of the business. Reporting a pretax loss of $1.7 million for 2007 last month, the company said revenues this year are expected to rise to the $80-$85 million range from $77.7 million in 2007. Expenses would be in the $79-$81 million range this year, it said.
Iona has cut its projected annualised costs by some $8 million. LogicBlaze and C24, which it acquired last year, are on track to be earnings accretive in 2008.
