Investing

Are Berkshire Grey Investors Getting Their Best Deal from Sweetened Softbank Takeover?

Ben Ward

Published: March 27, 2023 3:21 am

Last Updated: March 27, 2023 11:23 am

Berkshire Grey (US:BGRY), the e-commerce sector-focused robotics and AI company, is set to rise on Monday following news of a takeover deal from Japan-listed Softbank Group (JP:9984) that was announced after the close of trading for the week. BGRY shares rallied 18.4% to $1.35 per share in Friday’s extended trading session.

SoftBank Group announced that it will acquire all outstanding capital stock of Berkshire Grey for $1.40 per share in an all-cash transaction valued at approximately $375 million. The “merger” agreement will allow SoftBank to acquire the shares not currently owned by the company, representing around 72% of the float (from 28% ownership).

That offer is a dime more per share than what Softbank offered in early February for the Bedford, Massachusetts company as it again seeks to play big in robots. And Berkshire Grey’s current customer list, including TJ Maxx (US:TJX), Walmart (US:WMT) and FedEx (US:FDX), should continue to provide a nice growth trajectory for the company.

Masayoshi Son’s strategic investment holding company, with stakes in AI, smart robotics, IoT, telecommunications, internet services, and clean energy technology providers, has been an investor in Berkshire Grey since 2019.

Automating Warehouses

What does that AI and robotics technology do? It helps customers transform their fulfillment, supply chain, and logistics operations. Its game-changing technology combines AI and robotics to automate operations and deliver competitive advantages to its customers, including Global 100 retailers and logistics service providers.

CEO and founder Tom Wagner built the company to fill what he described to Forbes in July 2021 as “this enormous white space where there isn’t automation today.” “It’s all very hard technically,” Wagner said, adding “You cannot use the same technologies you use for manufacturing.”

That’s what drew Softbank to the company. “Right now only the big companies can access those technologies,” said Kent Yoshida, chief business officer at SoftBank Robotics, in that Forbes article.

The now-sweetened offer, which has gained the unanimous approval of Berkshire Grey’s board of directors, offers a premium of around 24% to the closing stock price on March 24.

Assuming the satisfaction of customary closing conditions, including approval from Berkshire Grey’s stockholders and regulatory approvals, the transaction is anticipated to be completed in the third quarter of 2023.

The SoftBank-Berkshire Grey merger is expected to strengthen the companies’ shared vision for robotics and automation, allowing them to serve customers with disruptive AI robotics technology that helps them become more efficient in their operations and maintain a competitive edge.

Best Deal

Berkshire Grey has been listed for less than two years. The company initially floated by way of a SPAC merger with Revolution Acceleration Acquisition in February 2021 at $10 per share.

The $1.40 offer consideration represents an 86% discount to the initial $2.7 billion market cap the company had when it listed.

Unfortunately, there were other factors weighing on the deal consideration.

Since listing, Berkshire has slowly shown an uptick in revenue growth, however this has been offset by widening losses by the company over time. This is illustrated in a chart from the Fintel financial metrics and ratios page for BGRY.

In the most recently reported third quarter results, Berkshire announced 26% sales growth over the year to $23.6 million. Offsetting the sales growth was the full year revenue forecast downgrade to $65 million-70 million, driven by client-specific project delays.

This was the second time during the year that management reduced sales forecasts.

A function of growing losses in an environment of rising interest rates with dilution concerns from the need for capital continually pushed the stock price lower.

The SoftBank deal is an easy win and will provide holders with a return of capital, albeit a smaller one than many likely sought.

Regardless of the outcome, the merger agreement between SoftBank and Berkshire Grey represents a significant development in the AI and robotics industries, and investors and industry analysts will be watching closely as the deal moves towards its expected closing in the third quarter of 2023.

This article originally appeared on Fintel