Wednesday, April 27, 2011

M&A Watch: Lawson, Icahn, and Private Equity (LWSN)

Lawson Software, Inc. (NASDAQ: LWSN) has managed to figure out a way to greatly underwhelm investors and speculators alike.  The company agreed to a sale price that is south of where the shares had traded.  While this is not illegal nor immoral, accepting what some would consider a “take-under” leaves a very bad taste in the mouths of investors.
The proposed buyout was for $11.25 per share in cash from Golden Gate Capital and from Infor.  The deal was said to be a competitive bidding process and the stock had run up before a deal was announced as investors were looking for further consolidation in the sector.
What is so interesting about this is that Carl Icahn was“seeking the highest price” yet the shares were much higher.  Shares had reached as high as $12.50 after word was out that the company might fetch more in a rival bid.  Then shares were trading at $12.13 just at the close on Monday.  A filing from Icahn today showed that a conversation took place with Lawson’s CEO and that this was the highest price available. The results for Icahn are not all that bad considering he was either the largest or second largest shareholder and that he started acquiring shares at $6.63 a year ago.
When we did the valuation analysis over the speculation in March for possibly more, we were a bit concerned as the private equity group was already paying almost 2-times 2012 earnings expectations.
Lawson’s 52-week trading range is $6.93 to $13.06, and the $13.06 high came after the surfacing of the offer.  The fact that Lawson was briefly higher ten years ago won’t matter to many any longer.  This is close enough to a high that it will be hard to argue that any laws were broken.  So far we have seen at least three different law firms issue statements about “investigations” over breach of fiduciary duty.  These sometimes blossom into class actions, but they often do not.
Any investor who bought before March made money.  Anyone investing in or speculating in Lawson after early March just learned the lesson that one buyout offer does not always garner yet another buyout offer.  This looks like a low-premium merger, but a low-premium merger that can still get done.

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