Bets of a Higher Price for SkillSoft (SKIL)

SkillSoft plc (NASDAQ: SKIL) may seem like an unusual buyout candidate for a private equity group.  The company offers on-demand distance-learning over the web or teleconference and performance support solutions for large enterprise groups, government agencies, education, and small to mid-sized businesses.  Shares are up this morning after an investor group including Berkshire Partners LLC, Advent International Corporation and Bain Capital Partners have agreed to pay $10.80 per share in cash for the company.

The company has reached an agreement on the terms of a recommended acquisition and shareholders will receive $10.80 in cash for each ordinary share or for each ADR.  Effectively, this is a $1.1 billion deal. The acquisition has been unanimously approved by SkillSoft’s Board of Directors and a committee of independent directors, and the Board intends to recommend to SkillSoft shareholders to vote in favor of the acquisition.

But some are hoping for or expecting a higher share price than the $10.80 per share.  At 10:00 AM EST we have shares trading at $11.08 and the range for the trading day is $11.07 to $11.21.  This is not being traded on thin volume either because we have seen 15+ million shares trade hands versus an average of only 240,000 share.

This is effectively a 5-Year high on the stock, but the ADRs traded above $20 back in 2001 and even above $40 in 2000 and back in 1998.  The stock is not very actively followed by analysts, but Thomson Reuters has Jan-2011 fiscal estimates at $0.74 and $320.18 million in revenues.  That $10.80 buyout price effectively represents forward multiples of 14.6-times earnings and over 3.4-times revenues.

SkillSoft will remain headquartered in Dublin, Ireland and will continue to be led by the current management team.  The buyout group represents that this is a 26% premium to the average closing price over the year ended on February 11 and represents a 49% premium to the average closing price of SkillSoft’s ADS over the five-year period ended on February 11, 2010.

The bet is on… Some shareholders will be happy with the price here now.  But some are not, or at least there are millions and millions of shares betting that the stock purchase price will be higher than $10.80.

You are invited to join our free daily email distribution list to hear about top analyst upgrades and downgrades, IPOs and secondary offerings, ongoing day trader and options trader alerts, stock and market rumors, Buffett and guru investor news, M&A and more.

JON C. OGG
FEBRUARY 12, 2010