Share price trends made TietoEnator a lucrative acquisition target

Nordic Capital denies offer is "hostile takeover bid"

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The Swedish capital investor Nordic Capital wants to buy the IT service company TietoEnator. On Thursday TietoEnator shareholders were offered EUR 15.50 a share, which would put the company's total value at EUR 1.1 billion. Also on Thursday, the share price of TietoEnator, which has long been in serious economic difficulties, exceeded the Nordic Capital offer, rising to EUR 16.
      Robert Furuhjelm, a Finnish partner in Nordic Capital, nevertheless felt that his company's offer was generous, noting that it was 38 per cent above the closing price of the company's shares on Wednesday. He also felt that the offer was high with respect to forecasts of upcoming trends.
     
The board of TietoEnator, under its current chairman Matti Lehti, immediately came out against the offer. The board when compared to the average share price over the past six months, the Nordic Capital offer constituted a premium of just 6.2 per cent.
     Lehti emphasised on Thursday that the company has latent upward potential, which is not yet apparent in the share prices. The growth potential stems from the development programme, whose goal is to achieve annual savings of EUR 100 million.
     On Thursday, Lehti would not give a precise assessment of what an appropriate price would be.
     Nordic Capital plans to release a brochure detailing its purchase offer by April the second.
     
The Nordic Capital offer is seen as a hostile takeover bid. The investment company informed Lehti of the intended buyout a week earlier.
     On Thursday, Nordic Capital firmly denied that its intentions were hostile. Harri Koponen, seen as a possible new chairman of TietoEnator, which is to be delisted from the stock exchange, felt that the bid was a friendly one.
     "We have faith in the potential of the company, and we want to develop it together with the management and the personnel", Koponen said.
     
Furuhjelm said that Nordic Capital had been in contact with Koponen, and asked him to chair the company after the takeover. The markets saw this as an indication that TietoEnator is to be kept in service activities of the telecommunications sector.
     Furuhjelm and Koponen emphasised that TietoEnator would continue to focus on the Nordic Countries, where it already has a strong foothold.
     
Analysts generally agreed with the TietoEnator board, according to which the buyer is trying to take over the company at a bargain price. The decline of the share price by about 50 per cent in the past two years offers a good opportunity for this.
     If at least 90 per cent of the present owners agree to the offer, the takeover will succeed. Otherwise, the prospect will fail.
     There is also a possibility that another buyer will show interest and make a higher bid. A competing offer could even come from India, where there are many companies in the field.
     On the other hand, the most important Indian companies in the field already have Nordic operations. Meanwhile, competition authorities probably would not approve of bids made by any of TietoEnator's Nordic competitors.
     
TietoEnator's ownership is widely dispersed. The biggest single holder of the company's shares is an investment fund owned by the investment bank Goldman Sachs, which has a ten per cent holding.
     The biggest Finnish shareholder, the retirement company Ilmarinen, did not want to take a stand on the offer last week. Ilmarinen owns 2.1 per cent of TietoEnator.


Previously in HS International Edition:
  TietoEnator to cut 400 jobs in Finland (25.1.2008)

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