Innofactor: Good offer for owners, competing bid unlikely

This report is a summary translation of the report “Hyvä ostotarjous omistajille ja kilpailevaa tarjousta tuskin tulee” published on 7/23/2024 at 8:25 am EEST.

A takeover bid for Innofactor was announced yesterday, offering the owners a cash price of EUR 1.68 per share. In our view, the offer is a good one for shareholders from a number of perspectives and we recommend accepting the offer. A high bid and a strong commitment from the primary owner through the terms and conditions make a successful bid very likely and a competing bid very unlikely. We raise our target price to EUR 1.68 (was EUR 1.2) in line with the offer and reiterate our Reduce recommendation as the share price has already risen to the offer price yesterday. 

Consortium including CapMan fund and Innofactor CEO has made a bid for Innofactor

Innofactor announced yesterday that Onni Bidco Oy has announced a public tender offer for all of Innofactor's shares. Onni Bidco Oy is formed by a fund managed by CapMan Growth, Innofactor's CEO Sami Ensio and his holding company and co-investor Osprey Capital Oy. The consideration consists of a cash payment of EUR 1.68 per Innofactor share, representing a premium of +49% to the pre-offer closing price and a premium of 31% to the 6-month volume-weighted average share price. Innofactor's Board of Directors also recommends that shareholders accept the offer. The offer period for the bid is expected to commence on August 5, 2024, and to expire on September 16, 2024, unless the offer period is extended to meet the conditions of the tender offer. Innofactor currently expects the takeover to be completed by the end of Q3 or early Q4.

Good offer for shareholders from several perspectives

The offer is fully in line with our post-Q2 DCF calculation of EUR 1.68 and represents a good 40% premium to our pre-offer target price of EUR 1.2. In terms of 2024e valuation multiples (P/E 16x and EV/EBIT 13x), it also represents a premium of just over 20% to Finnish peers. The corresponding multiples for Finnish listed peers for 2019-2023 average 17x and 13x, which also reflects the strength of the offer, especially considering that the valuation is mainly driven by lower required returns. Thus, we think the consideration is good from a number of different perspectives. Operationally, Innofactor has made good progress in Finland in recent years, but development in other Nordic countries has been limited for years. In addition, the difficult market situation is now beginning to be reflected in the company's weaker operating performance. Therefore, the potential in our DCF calculation relies very much on future performance, and we believe the current offer is a good one from an owner's perspective.

Unlikely to see a competing bid

We believe a competing bid is unlikely as Sami Ensio's ownership is very strongly tied to this bid by the terms, while a better bid should be 100% higher than the current bid as per the offer terms. In addition, the currently offered price is already good from a number of perspectives. At the takeover press conference, Ensio also disclosed that Innofactor had evaluated several options over the past year and concluded that this option was the best from a financial, shareholder and company perspective.