European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Silver Lake announced it waived the minimum acceptance threshold of 50% + 1 share in  its offer for <a href="https://www.smartkarma.com/entities/software-ag" target="_blank" data-smartkarma-citation="entities:21717:1" rel="noopener">Software AG (SOW GR)</a> . The acceptance period has been extended until 28 June.</li>
<li>Bain Capital abandons the pursuit and will sell its 10.01% stake to Silver Lake, which will now controls 41%, plus another 10% from a convertible bond.</li>
<li>Silver Lake is now pressing the minority shareholders to tender. Spread is 1.44%/15.13% (gross/annualised), assuming settlement on 31 July. I believe that Silver Lake will be successful. Long and tender.</li>
</ul>


Silver Lake announced it waived the minimum acceptance threshold of 50% + 1 share in  its offer for Software AG (SOW GR) . The acceptance period has been extended until 28 June.
Bain Capital abandons the pursuit and will sell its 10.01% stake to Silver Lake, which will now controls 41%, plus another 10% from a convertible bond.
Silver Lake is now pressing the minority shareholders to tender. Spread is 1.44%/15.13% (gross/annualised), assuming settlement on 31 July. I believe that Silver Lake will be successful. Long and tender.


Silver Lake/Software AG: Bain Clears the Way

<ul>
<li>Bain goes mildly hostile, with a €34/share indicative offer (20.5x EV/Fwd EBIT on IBES consensus), above 11.1x last-10y average. Further, if it fully succeeded, it'd raise to €36/share (21.6x).</li>
<li>Software AG dislikes the improved indicative offer. The situation reminds of the battle for <a href="https://www.smartkarma.com/entities/caverion-corp" target="_blank" data-smartkarma-citation="entities:21753:1" rel="noopener">Caverion Corp (CAV1V FH)</a>, now being played, in which precisely Bain has been the unexpected loser.</li>
<li>At this point, it seems Silver Lake will have to raise its offer again. I raise my TP to €34. Long (possible upside to Bain's €36/share, 6.1% gross).</li>
</ul>


Bain goes mildly hostile, with a €34/share indicative offer (20.5x EV/Fwd EBIT on IBES consensus), above 11.1x last-10y average. Further, if it fully succeeded, it'd raise to €36/share (21.6x).
Software AG dislikes the improved indicative offer. The situation reminds of the battle for Caverion Corp (CAV1V FH), now being played, in which precisely Bain has been the unexpected loser.
At this point, it seems Silver Lake will have to raise its offer again. I raise my TP to €34. Long (possible upside to Bain's €36/share, 6.1% gross).


<ul>
<li>Bain has a 10.01% stake (likely acquired &lt;€32/share) and could play nasty: its stake is enough to block a squeeze-out, and if it launches a €34/share offer, it will be hostile.</li>
<li>Meanwhile, Silver Lake (5% recently acquired+25.1% from the foundation) has sweetened to €32/share (19.4x EV/Fwd EBIT, well above 11.1x last-10y average). The Board could change sides (as recently with Caverion).</li>
<li>The shares trade 3.5% above Silver Lake's, but at a discount of 2.5% to Bain's possible offer. The market believes Bain will bid. I raise my TP to €32.</li>
</ul>


Bain has a 10.01% stake (likely acquired &lt;€32/share) and could play nasty: its stake is enough to block a squeeze-out, and if it launches a €34/share offer, it will be hostile.
Meanwhile, Silver Lake (5% recently acquired+25.1% from the foundation) has sweetened to €32/share (19.4x EV/Fwd EBIT, well above 11.1x last-10y average). The Board could change sides (as recently with Caverion).
The shares trade 3.5% above Silver Lake's, but at a discount of 2.5% to Bain's possible offer. The market believes Bain will bid. I raise my TP to €32.


Equity Analyst, Event-driven, Quiddity Advisors

Janaghan Jeyakumar, CFA

Equity Analyst, Event-driven

Quiddity Advisors

Pan-Asia Catalysts/Events

<ul>
<li>In this insight, we take a look at the names leading the race to become ADDs/DELs for the DAX, MDAX, and SDAX Indices in the September 2023 Rebalance.</li>
<li>
<a href="https://www.smartkarma.com/entities/software-ag" target="_blank" data-smartkarma-citation="entities:21717:1" rel="noopener">Software AG (SOW GR)</a> was deleted from the MDAX index triggering a couple of interim changes in the last week of July 2023.</li>
<li>Currently, I do not expect any changes for the DAX or MDAX indices in September 2023 but I expect one change for the SDAX index.</li>
</ul>


In this insight, we take a look at the names leading the race to become ADDs/DELs for the DAX, MDAX, and SDAX Indices in the September 2023 Rebalance.

Software AG (SOW GR) was deleted from the MDAX index triggering a couple of interim changes in the last week of July 2023.
Currently, I do not expect any changes for the DAX or MDAX indices in September 2023 but I expect one change for the SDAX index.


Quiddity Leaderboard-DAX Sep 23: No More Catalyst for the Short Sartorius - LONG Merck Trade

<ul>
<li>The board of <a href="https://www.smartkarma.com/entities/softwareone-holding-ag" target="_blank" data-smartkarma-citation="entities:39864:1" rel="noopener">SoftwareONE Holding (SWON SW)</a> rejected on 24 July a revised CHF 19.50-20.50 offer from Bain Capital and said it began a strategic review to seek the best value.</li>
<li>CHF 19.5 represents a 40% premium, Gross spread to the low point of the range is 4.2%. 0x EV/NTM EBITDA and 19.5 Fwd P/E.</li>
<li>This could trigger upwards revisions and would justify the Board asking for a higher offer. I'd hold on to the shares as Bain Capital could increase the offer a bit.</li>
</ul>


The board of SoftwareONE Holding (SWON SW) rejected on 24 July a revised CHF 19.50-20.50 offer from Bain Capital and said it began a strategic review to seek the best value.
CHF 19.5 represents a 40% premium, Gross spread to the low point of the range is 4.2%. 0x EV/NTM EBITDA and 19.5 Fwd P/E.
This could trigger upwards revisions and would justify the Board asking for a higher offer. I'd hold on to the shares as Bain Capital could increase the offer a bit.


Bain Capital/​SoftwareOne: Bargaining for a Better Offer

Germany

Software AG operates as a software development company. The Company enables enterprises to integrate, connect, and manage IoT components, as well as analyze data and predict future events based on artificial intelligence. Software serves customers worldwide.

Software (SOW GR)

Silver Lake/Software AG: Bain Clears the Way

With the minimum acceptance condition dropped and Bain selling its 10% to Silver Lake, the takeover seems clear. The market has reluctantly...

Jesus Rodriguez Aguilar

Rocket Software (Bain) Ups the Game

On late evening 9 May, Rocket Software, a US competitor controlled by Bain Capital, submitted a revised legally non-binding expression of interest...

Jesus Rodriguez Aguilar

Sweetened Offer and Bain Interloping

Software AG agreed on 4 May to amend the investment agreement concluded on 21 April with Silver Lake. The offer price is increased to €32.00, an...

Jesus Rodriguez Aguilar

Quiddity Leaderboard-DAX Sep 23: No More Catalyst for the Short Sartorius - LONG Merck Trade

I do not expect Sartorius to get deleted from DAX in Sep 23. Despite the fundamentals still supporting the Short Sartorius - LONG Merck trade, I do...

Janaghan Jeyakumar, CFA

Bain Capital/SoftwareOne: Bargaining for a Better Offer

The Board unanimously agreed that the second indicative offer CHF 19.5-20.5 does not adequately value the Company and is not in the best interest...

Jesus Rodriguez Aguilar

Silver Lake/Software AG: Bain Clears the Way

With the minimum acceptance condition dropped and Bain selling its 10% to Silver Lake, the takeover seems clear. The market has reluctantly...

Jesus Rodriguez Aguilar

Rocket Software (Bain) Ups the Game

On late evening 9 May, Rocket Software, a US competitor controlled by Bain Capital, submitted a revised legally non-binding expression of interest...

Jesus Rodriguez Aguilar

Sweetened Offer and Bain Interloping

Software AG agreed on 4 May to amend the investment agreement concluded on 21 April with Silver Lake. The offer price is increased to €32.00, an...

Jesus Rodriguez Aguilar

Quiddity Leaderboard-DAX Sep 23: No More Catalyst for the Short Sartorius - LONG Merck Trade

I do not expect Sartorius to get deleted from DAX in Sep 23. Despite the fundamentals still supporting the Short Sartorius - LONG Merck trade, I do...

Janaghan Jeyakumar, CFA

Bain Capital/​SoftwareOne: Bargaining for a Better Offer

The Board unanimously agreed that the second indicative offer CHF 19.5-20.5 does not adequately value the Company and is not in the best interest...

Jesus Rodriguez Aguilar

Bain Capital/SoftwareOne: Bargaining for a Better Offer