KEY POINTS:
Broker ABN Amro Craigs has revised down its valuation on takeover target Software of Excellence, effectively painting US company Henry Schein's $2.70-a-share offer in a more favourable light.
ABN Amro, the only broker that covers the dental records software company, now values it at $2.54, down from the
$2.76 figure arrived at just a few weeks ago by analyst Brett Orsler, who is no longer with the company.
Analysts Mark Lister and Michelle Perkins said they had kept Orsler's model but revised assumptions around the previously flagged impact of an unfavourable exchange rate against the British pound, higher interest rates and the payment of a fully imputed 3c dividend.
An independent valuation by Grant Samuel, issued with the target company statement, valued the firm at $2.70 to $2.91 a share. Grant Samuel said the difference between the offer and SoE's share price before the offer was a sufficient takeover premium. SoE's independent directors recommended the offer, saying a European growth strategy that is the next logical step for the company had less attractive risk/return characteristics than accepting Henry Schein's offer.
Orsler had said only an offer of above $3 a share was sufficient takeover premium for shareholders, and although ABN Amro still had a "hold" recommendation on the company, Lister and Perkins said: "We believe it is reasonable and recommend shareholders consider accepting."
They said the options for SoE shareholders were:
* Accept and invest the proceeds elsewhere.
* Sell on market now, and should the offer fail, buy the shares back at what is likely to be a much lower price.
* Forgo the offer and accept the likely fall back in share price if the offer failed.
"Over time we expect the company to do well ... but that might be a couple of years away," said Lister.
SoE's key market is the UK, where about 85 per cent of its revenue is generated but where its growth prospects are seen as easing.
Henry Schein's vice-president of investor relations, Neal Goldner, confirmed that his Fortune 500 company would, if its offer was successful, look to expand SoE into the European market.
"It does make an awful lot of sense. We are the largest dental distributor across Europe and we have strong relationships with existing customers whereas Software of Excellence doesn't have that."
Henry Schein had now secured almost 38 per cent of SoE, including cornerstone shareholder Co-Investor and managing director Brian Weatherly's combined 23 per cent stake, according to a notice to the market yesterday.
Lister said Henry Schein might choose to make its offer unconditional if it secured acceptances exceeding 50 per cent, which would give hold-out shareholders the option of keeping their shares and going along for the ride.
With the offer open until August 17, Goldner said: "If we don't get 90 per cent by then we'll have to re-evaluate our options at that time."
SoE shares closed 2 cents higher at $2.63 yesterday.
