Current Price: $1.80
Offer Price: $1.93
Closing date: mid 2020
This is a merger between two nano cap SaaS companies. Video platform services provider Qumu is being acquired by a digital technology company Synacor in an all stock transaction - 1.61 SYNC shares for each QUMU share. Currently spread stands at 8%, while borrow is available and cheap.
Shareholder approvals from both companies is required. Currently 24% of SYNC and 12% of QUMU shareholders have signed the support agreements.
Transaction comes at a slight discount to pre-announcement price ($2.44/share vs $2.52/share), so the risk of QUMU shareholders rejecting the merger definitely exists, however the business of the target company has been showing a lackluster performance for the last several years and the largest shareholder (10.3%) supports the transaction.
- The strategic rationale behind the transaction is mostly related to scale issues of the companies and various cross selling opportunities. Synergies from operating expenses are expected to be at $4m-$5m in the first year (vs $90m of QUMU in '18 and $140m of SYNC in '18) and 40% of that will be realized through eliminating duplicative public listing costs.
- Cross selling opportunities come mainly from offering Qumu video platform to about 4000 business, government, content provider etc. SYNC customers and 1900 channel partners as well.
- SYNC has some experience with M&A and has previously acquired publisher advertising company Technorati ($3m) in 2016 and email/messaging software company Zimbra for $24.5m in 2015.
- Both companies show a lackluster performance, are not profitable and last year most major shareholders of both companies were decreasing their stakes.
The company provides software solutions to create, manage, secure, distribute and measure the success of live and on-demand video for enterprises. QUMU has about 175 customers, who annually bring ~$25m revenues. For the last 4 years revenues have been shrinking on average by 7%.
- Harbert Discovery Fund -10.3% (supports the transaction)
- Renessaince Fund - 5.7%
- Palogic Value Management - 3.7%
- Dolphin Limited Partnership - 4.5%
Synacor is a digital technology company that provides email and collaboration software, cloud-based identity management platforms, managed web and mobile portals, and advertising solutions. The company has two reportable segments: Software & Services (33%) and Portal & Advertising (67%). For the last 5 quarters SYNC revenues have been shrinking on average by 8% YoY.
- Walden International - 9.9% (supports the transaction)
- 180 Degree Capital - 7.5% (supports the transaction)
- Advantage Capital - 5.6% (supports the transaction)
- Vanguard - 5.3%
- Ariel Investments - 3.4%