(Reuters) – British software firm Innovation Group Plc (TIG.L) said on Tuesday it received an expression of interest at 15 pence per share, about 250 percent premium to the stock’s closing price on Monday, from private-equity firm Carlyle Group.
Innovation, which provides outsourcing services to the insurance industry, said discussions were at a “very preliminary” stage.
The company may not accept the offer as it had rejected higher bids earlier and a winning bid would likely be around 25 pence per share, Panmure Gordon & Co analyst George O’Connor told Reuters.
“I think there is lots of value buried in Innovation, but it will take time for that to be reflective in the share price,” O’Connor said.
In December, the company had said it rejected offers ranging from 15 pence to 20 pence per share as they were “not at a level acceptable” to the majority of its shareholders.
“The upside from a potential takeover is counterbalanced by the risk of the litigation from AllState Canada, which is suing Innovation in relation to the design, development, and implementation of customised software,” Singer Capital Markets Tintin Stormont said in a research note.
Panmure’s O’Connor, who upgraded the stock to “buy” from “hold”, said the fresh bid might encourage Innovation to double its efforts to unlock its value.
Analyst Simon Strong of KBC Peel Hunt said: “This approach could easily flush out another bidder for the company.”
Innovation’s current management is more “pragmatic” to offers, while the prior chairman was an “obstacle” to any bid for the company, Strong said.
In January, Innovation’s former chairman Geoff Squire stepped down and the company had appointed David Thorpe as its interim chairman.
“We believe it is no coincidence that this offer materialises so quickly after the departure of the old chairman,” KBC’s Strong said.
Strong reiterated his “buy” rating on the stock and said a price “north of 15 pence could easily be achieved”.
Innovation shares were up 3.2 pence at 7.5 pence at 1139 GMT on the London Stock Exchange. They earlier soared 92 percent to 8.25 pence.
The shares have lost 23 percent of their value since the start of the year through Monday. (Editing by Himani Sarkar and Gopakumar Warrier)