KEY POINTS:
Software of Excellence will pay its largest shareholder, Australian firm Co-Investor Capital Partners, a $350,000 consultation fee should US firm Henry Schein's takeover offer succeed.
Just weeks after the company raised its earnings guidance, SOE's independent directors yesterday recommended Henry Schein's lowball offer, and painted a downbeat picture of its future growth prospects should the offer fail.
Fortune 500 medical services company Henry Schein has offered $2.70 a share for the dental software company's mandatory convertible notes.
In a report sent to shareholders, along with the target company statement yesterday, independent advisers Grant Samuel valued the company at between $2.70 and $2.91 a share.
Despite the offer being at the bottom end of that range, SOE recommended it after making what they described as "a fine judgment call".
SOE chief executive Brian Weatherly and 16.78 per cent shareholder Co-Investor Capital Partners, part-owned by Contact Energy director Phil Pryke, have already agreed to sell their stakes in the company, which gives Henry Schein about 23 per cent of the company.
Co-Investor, whose director Roger Sharp also has a seat on SOE's board, has been retained by the company to provide advisory services in relation to the offer, for which it will receive fees totalling up to $350,000, partly conditional on the outcome of the bid, Grant Samuel said.
Sharp was not involved in formal consideration of Henry Schein's offer.
SOE derives 85 per cent of its revenue from the UK market, but its independent directors said the company's existing markets were "mature and exhibiting modest levels of underlying growth".
They believed the company needed to look to Europe for suitable growth opportunities which were likely to be pricey in any case.
The independent directors also referred to the potential for SOE's earnings to be affected by the present strength of the kiwi. Henry Schein's offer provided shareholders and McN holders "with certainty and a premium for control, in an environment where further expansion (especially in Europe) carries significant risk".
SOE shares closed 3c lower at $2.56 yesterday.
