European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>On 1 December, Blue Prism recommended SS&amp;C's 1,275p offer, 2% above Vista's "increased and final". Minimal acceptance condition is 75%. SS&amp;C's leverage will reach 4.05x net debt/adjusted EBITDA.</li>
<li>Consideration represents an implied equity value of £1,24 billion, a lofty 6.2x EV/Fwd Revenue, which reflects the growth prospects for the industry.</li>
<li>A new bid from Vista is highly likely. It could lead to a Takeover Panel-led auction. Reiterate long PRSM LN.</li>
</ul>


On 1 December, Blue Prism recommended SS&amp;C's 1,275p offer, 2% above Vista's "increased and final". Minimal acceptance condition is 75%. SS&amp;C's leverage will reach 4.05x net debt/adjusted EBITDA.
Consideration represents an implied equity value of £1,24 billion, a lofty 6.2x EV/Fwd Revenue, which reflects the growth prospects for the industry.
A new bid from Vista is highly likely. It could lead to a Takeover Panel-led auction. Reiterate long PRSM LN.


<ul>
<li>The sweetened offer finally came, preemptively and close to the level mentioned, anticipating a potential offer by SS&amp;C. Tactics resemble those used in the battle for Morrisons.</li>
<li>Vista increases the offer price to 1,250p, 11% higher than the first offer, for an implied equity value of £1,219 million, and 6.1x EV/Fwd Revenue (vs. 5.2x first offer).</li>
<li>My updated fair value estimate is 1,380p, on 6.6x EV/Fwd Revenue. Gross spread is c. -3.1%, the market believes there’s more to come. Reiterate long PRSM LN.</li>
</ul>


The sweetened offer finally came, preemptively and close to the level mentioned, anticipating a potential offer by SS&amp;C. Tactics resemble those used in the battle for Morrisons.
Vista increases the offer price to 1,250p, 11% higher than the first offer, for an implied equity value of £1,219 million, and 6.1x EV/Fwd Revenue (vs. 5.2x first offer).
My updated fair value estimate is 1,380p, on 6.6x EV/Fwd Revenue. Gross spread is c. -3.1%, the market believes there’s more to come. Reiterate long PRSM LN.


Vista/Blue Prism: “Increased and Final” Offer Amidst Potential Bid Contest

<ul>
<li>Blue Prism received a 1,200p/share approach from SS&amp;C Technologies, 5.2x EV/22e Revenue, c. 7% higher than potentially conflicting Vista's lowball agreed offer, but still below comps-based 1,521p (7.1x EV/Fwd Revenue).</li>
<li>
SS&amp;C is a disciplined buyer with a track record of successful acquisitions. It is reducing leverage (BB stable rated) and could use funds earmarked for buybacks and increase borrowing.</li>
<li>Subject to confirmatory due diligence/offer by SS&amp;C, Vista could reply raising its offer by c.10%, to 1238p/share, any higher would imply that it was trying to rip off Blue Prism's shareholders.</li>
</ul>


Blue Prism received a 1,200p/share approach from SS&amp;C Technologies, 5.2x EV/22e Revenue, c. 7% higher than potentially conflicting Vista's lowball agreed offer, but still below comps-based 1,521p (7.1x EV/Fwd Revenue).

SS&amp;C is a disciplined buyer with a track record of successful acquisitions. It is reducing leverage (BB stable rated) and could use funds earmarked for buybacks and increase borrowing.
Subject to confirmatory due diligence/offer by SS&amp;C, Vista could reply raising its offer by c.10%, to 1238p/share, any higher would imply that it was trying to rip off Blue Prism's shareholders.


On 28 September, Vista Equity Partners Management, LLC reached an agreement to acquire <a href="https://www.smartkarma.com/entities/blue-prism-group-plc" target="_blank" data-smartkarma-citation="entities:23475:1" rel="noopener">Blue Prism (PRSM LN)</a> Group plc for £1.1 bn, to be effected by a scheme of arrangement.
Consideration is 1,125p/share, in cash, cum dividend. For an implied equity value of £1,090 mn (£1,095 as reported), and an implied EV of c. £966.5 mn. It represents 5.2x EV/ Fwd Revenue, and 59% of the LTM high share price. Vista has received irrevocable undertakings and letters of intent in respect of 22,261,402 shares (23%).
Vista intends to expand Blue Prism's enterprise software offering and strengthen its exposure to the robotic process automation sector. Vista intends to merge Blue Prism with TIBCO, a company in Vista's portfolio, to yield synergies and market differentiation, combining the go to market strategy and the product and R&amp;D budgets. The merged company will provide customers with access to a complementary set of hyperautomation capabilities.
Synergies would come from systems and infrastructure, SG&amp;A (facilities, contracts and shared services) and headcount reductions of 8 to 10% of the c. 4,750 employees of the merged group; in aggregate cost savings should approximately total 15% of the combined Group. Vista intends to explore the potential sale of all or a portion of its equity interest in the combined group which may happen within the next 12 months.
From my calculations, synergies could be worth at least 151p/share (15% of SG&amp;A of Blue Prism, capitalized minus cost of synergies).
EV/Fwd sales comparables median implied valuation is 1,521p/share, still 20% less than where the shares were trading last January. For comparison, median Capital IQ consensus TP is 1,375p. Underperformance is due to investor concern over continued losses and Covid delays to sales. Mr Kingdon (CEO) warned earlier this year that the market is drastically undervaluing the company and hinted it was considering a shift to New York. 
Gross spread is -2.2%, with strong volumes traded since the agreement was announced. The market believes there will be a sweetened offer. Long PRSM.
Coast Capital believes Blue Prism is currently undervalued, warned the Board not to sell and said the business is still worth far more than its share price suggests. Coast urged not to “throw in the towel”.

On 28 September, Vista Equity Partners Management, LLC reached an agreement to acquire Blue Prism (PRSM LN) Group plc for £1.1 bn, to be effected by a scheme of arrangement.
Consideration is 1,125p/share, in cash, cum dividend. For an implied equity value of £1,090 mn (£1,095 as reported), and an implied EV of c. £966.5 mn. It represents 5.2x EV/ Fwd Revenue, and 59% of the LTM high share price. Vista has received irrevocable undertakings and letters of intent in respect of 22,261,402 shares (23%).
Vista intends to expand Blue Prism's enterprise software offering and strengthen its exposure to the robotic process automation sector. Vista intends to merge Blue Prism with TIBCO, a company in Vista's portfolio, to yield synergies and market differentiation, combining the go to market strategy and the product and R&amp;D budgets. The merged company will provide customers with access to a complementary set of hyperautomation capabilities.
Synergies would come from systems and infrastructure, SG&amp;A (facilities, contracts and shared services) and headcount reductions of 8 to 10% of the c. 4,750 employees of the merged group; in aggregate cost savings should approximately total 15% of the combined Group. Vista intends to explore the potential sale of all or a portion of its equity interest in the combined group which may happen within the next 12 months.
From my calculations, synergies could be worth at least 151p/share (15% of SG&amp;A of Blue Prism, capitalized minus cost of synergies).
EV/Fwd sales comparables median implied valuation is 1,521p/share, still 20% less than where the shares were trading last January. For comparison, median Capital IQ consensus TP is 1,375p. Underperformance is due to investor concern over continued losses and Covid delays to sales. Mr Kingdon (CEO) warned earlier this year that the market is drastically undervaluing the company and hinted it was considering a shift to New York. 
Gross spread is -2.2%, with strong volumes traded since the agreement was announced. The market believes there will be a sweetened offer. Long PRSM.
Coast Capital believes Blue Prism is currently undervalued, warned the Board not to sell and said the business is still worth far more than its share price suggests. Coast urged not to “throw in the towel”.

Vista/Blue Prism Group: Agreed Lowball Offer

President, Vision Research

Robert C Prather Jr

President

Vision Research

Vision Research was formed in 2004 with the vision of generating the best possible fundamental analysis and investment research for smid cap US equities. In 2008, we broadened our coverage to include mid/large cap US stocks.  After researching a  few ideas outside the US each year for a number of years, we launched a dedicated non-US equity product at the end of 2015.  This was followed by the introduction of a product focused on IPOs in mid-2017.

Fundamental Insight

Equity Bottom-Up

The RPA market has been growing rapidly, attracting new entrants and existing software companies introducing RPA offerings.  These risks and others may not be factored into revenue and earnings estimates and valuation multiples for this recent IPO with a market cap that exceeds $30bn.

The RPA market has been growing rapidly, attracting new entrants and existing software companies introducing RPA offerings.  These risks and others may not be factored into revenue and earnings estimates and valuation multiples for this recent IPO with a market cap that exceeds $30bn.

UiPath, Inc (PATH) - Competition in the RPA Space Creates Questions Around Estimates and Valuation

United Kingdom

Blue Prism is a British multinational software corporation that develops enterprise robotic process automation (RPA) software, business process management (BPM) software, and provides AI services. Their intelligent automation platform enables organizations to create a "digital workforce" to automate repetitive, rule-based tasks across various sectors. The company was founded in 2001 and is headquartered in Warrington, UK.

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Blue Prism (PRSM LN)

SS&C/Blue Prism: Ongoing Bidding War

Blue Prism recommends SS&C's 1,275p offer, 2% above Vista's. A raised offer by the latter is highly likely. It could lead to a Takeover Panel-led...

Jesus Rodriguez Aguilar

Vista/Blue Prism: “Increased and Final” Offer Amidst Potential Bid Contest

The sweetened offer finally came, preemptively and close to the level mentioned, anticipating a potential offer by SS&C. Tactics resemble to those...

Jesus Rodriguez Aguilar

SS&C Gatecrashes Vista/Blue Prism Deal

Subject to confirmatory due diligence/formal offer by SS&C, Vista could raise its offer by c.10%, to 1238p/share, any higher would imply that it...

Jesus Rodriguez Aguilar

Vista/Blue Prism Group: Agreed Lowball Offer

Median implied valuation is 1,521p, still 20% less than where the shares traded last January. Gross spread is -2.2%, market believes there will be...

Jesus Rodriguez Aguilar

UiPath, Inc (PATH) - Competition in the RPA Space Creates Questions Around Estimates and Valuation

A growthy, hyped software company faces significant competitive threats as a recent entrant, Microsoft, has taken the RPA market by storm.

Robert C Prather Jr

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