Takeover bid for SAI Global

Two years after SAI Global failed to sell itself, another private equity firm has made a $4.75 a share bid.

We’ve been ambivalent about standards publishing and compliance group SAI Global for some time. Our concerns centred mainly on its publishing licence with Standards Australia, which will need to be renewed over the next year. As its relationship with Standards Australia is strained – to put it mildly – the renewal is a significant risk.

Uncertainty about the licence was behind the failure of SAI Global to auction itself off in 2014. That process had been initiated after private equity firm Pacific Equity Partners bid for the company at a price between $5.10 and $5.25 earlier that year.

Our concerns have led us to sit on our hands since SAI Global: Result 2015. The stock has looked like reasonable value recently, but we couldn’t get comfortable with the risks or management’s strategy.

Today the decision has been made for us. SAI Global has agreed to be acquired by Baring Asia, another private equity fund, for a price of $4.75 a share. Presumably Baring Asia has done its due diligence and is comfortable with the licence renewal issue. Perhaps it thinks a different approach than SAI Global’s current management has taken will win over Standards Australia.

As we’ve not had a positive recommendation on SAI Global, we’ve not given it much time and won’t start now. If you hold the stock, however, we recommend you continue to do so. Baring Asia might encourage other private equity firms to renew their interest (although probably not).

Absent further developments, we’ll comment closer to the shareholder vote, which is planned for early December. Until then, HOLD.

Disclosure: The author owns shares in SAI Global.

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