Of course, it will require shareholder approval but, with Keysight receiving irrevocable undertakings from over 15% of Anite’s shareholders, it seems likely that it will gain sufficient support to progress. And, with the deal valuing Anite at a 22% premium to its closing share price yesterday of £1.03, the offer appears to be generous – especially since it is an all-cash offer.

A Good Deal

Clearly, Keysight and Anite’s management teams believe that the deal is a good one for Anite. As well as the usual synergies and shared costs that are a benefit of most mergers and acquisitions, the deal will see a bigger company better able to take on rivals and support customers in an industry where size and scale are becoming increasingly important. Furthermore, Keysight believes that Anite’s software expertise will complement its own hardware expertise and will allow the joint business to better serve the increasing customer consolidation that has become a feature of the markets in which the two companies operate.

A Bad Deal

While the offer price does represent a substantial premium to Anite’s closing share price from yesterday and the combined entity looks set for a very bright future, the deal may not be such a good one for Anite’s shareholders. Certainly, they will be pleased with today’s share price gains, but Anite’s share price could have moved considerably higher over the medium term.

That’s because it is expected to post impressive earnings growth numbers over the next two years, with growth of 19% forecast for the current year, and 11% pencilled in for next year. Despite this, Anite’s current share price of £1.27 (which is slightly above the offer price of £1.26) equates to a price to earnings (P/E) ratio of 19.1 which, when combined with its growth rate, equates to a price to earnings growth (PEG) ratio of around 1.2.

This represents growth at a reasonable price and so it could be argued that Anite’s share price had further upside above and beyond the £1.26 offer from Keysight. In fact, a level similar to that reached in 2012, when Anite’s share price hit £1.60, could have been achievable in the coming years.

Looking Ahead

Whether or not it is a good or bad deal for Anite’s investors, it appears likely that the proposed acquisition will become a reality. And, while Anite’s share price may have moved higher in the long run, the company’s investors will at least have the cash available to invest in other, similarly exciting, opportunities.

The post Anite plc Surges 24% On £388m Cash Offer appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

This followed an upbeat first half of the year, with a seasonal lull in activity that normally takes place in the third quarter of the year being swept aside this time around. As a result, the company has maintained its full-year guidance and, as a result, investor sentiment in the company has helped to push its share price considerably higher.

And, as a result of the strong third quarter, Anite has entered the seasonally important final quarter of the year with a larger pipeline of sales opportunities than at the same time as last year, which bodes well for the near-term outlook for the company, too.

Valuation

Despite today’s share price gains, Anite still offers good value for money. For example, it currently trades on a price to earnings (P/E) ratio of 15.7 which, when you take into account its forecast growth rate in earnings over the next two years, indicates that its shares are underpriced right now.

That’s because Anite is expected to increase its bottom line by 16% next year, followed by a further rise of 11% in the year after. When combined with its P/E ratio, this equates to a price to earnings growth (PEG) ratio of just 1.1, which indicates that growth is on offer at a very reasonable price.

Sector Peers

Clearly, Anite is a relatively small company and, looking at the software and computer services sector, two of the largest companies by market capitalisation are Sage (LSE: SGE) and Micro Focus (LSE: MCRO). When comparing Anite to its two larger peers, it seems to more than hold its own.

For example, although Sage is expected to increase its bottom line by 11% next year, followed by 8% the year after, its rather rich P/E ratio of 21 seems to somewhat price this in, with it having a PEG ratio of 1.8. And, even though Micro Focus has a lower valuation that Sage or Anite, with it having a P/E ratio of 15.3, its slightly lower growth prospects equate to a PEG ratio of 1.3, which is less appealing than that of Anite.

Of course, both Sage and Micro Focus offer increased scale and diversity than Anite, which goes a long way to explaining their higher valuations. However, Anite still appears to offer great prospects at a highly appealing price and, as such, could make for an excellent partner for sector peers Micro Focus and Sage in your portfolio.

The post Is Anite plc The Perfect Partner For The Sage Group plc & Micro Focus International plc In Your Portfolio? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Micro Focus. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.