Shareholders in Autonomy are likely to snap up Hewlett-Packard (HPQ-N22.65-1.22-5.11%)’s fully priced offer on Monday, as the chances of a competing bid for the enterprise search software firm recede.
HP is buying Autonomy for an eye-popping $11.7-billion (U.S.), or 10 times annual sales, to be the centrepiece of a major shift out of low-margin PCs into higher-margin enterprise software.
Founder Mike Lynch, who holds 8 per cent, negotiated the deal and will continue to lead the company as a unit of the firm that put Silicon Valley on the map.
“It is looking increasingly unlikely that a counter-bidder will emerge for Autonomy,” said Neil Campling of stockbroker Aviate.
“Earlier in the situation, I would have put the chance of this happening at one in four: now I would say there is a one-in-five chance at best.”
Shares in Autonomy opened up 77 per cent the day after the deal was announced – one of the largest one-day jumps in stock market history – and have traded just below the offer price since. They were at 2,518 pence at 3:29 p.m. on Friday.
Autonomy, whose software helps companies manage and search complex data such as e-mails, video and tweets that cannot be organized in traditional databases, is simply not as valuable to other companies, analysts have said.
Peel Hunt’s Paul Morland said after the bid was announced that shareholders should accept the offer before HP changes its mind.
“Most long-only funds have already sold in the market,” he said on Friday. “No one is going to pay more than this.”
Microsoft had cast an eye over the business, analysts have said, before it opted to buy smaller competitor Fast Search & Transfer in 2008, for $1.2-billion, implying a sales multiple of 5.3 times.
The fingerprints of well-known tech banker Frank Quattrone’s Qatalyst Partners on the deal – as lead adviser to Autonomy – also indicate Autonomy is selling at the highest price possible.
Quattrone, a successful but controversial star of the 1990s tech boom, is known as an aggressive dealmaker who can achieve sky-high premiums for clients.
“I think the premium that HP is already paying is job done for Qatalyst,” one banker said. “There is no need of a counter-bidder to jack up competitive tension.”
One London-based analyst, who asked not to be named, said: “I don’t see why (shareholders) wouldn’t tender, it’s a done deal.
“The valuation would imply it was a competitive process and Quattrone is well known for good defence on M&A, so he would have made sure the appropriate people had taken a look at Autonomy.”
