Learning Technologies Group PLC (AIM:LTG, OTC:LTTHF) has received a conditional offer of 100p per share from General Atlantic, a US private equity firm, valuing LTG at around £815 million.
Discussions have started with General Atlantic and LTG has provided access to due diligence.
Broker Peel Hunt adds that the offer price is 33% higher than LTG’s share price of 75p on 26 September and represents 7.7 times the enterprise value ratio, which is in line with its value earlier this year.
“We believe LTG’s trading should improve as macroeconomic conditions turn around.
“Given that most investors are unlikely to roll their shares into the private vehicle, we consider the offer at 7.7x NTM EV/EBITDA to be too low.
“Despite some headwinds surrounding the business, we believe an offer at this level will not gain full investor support.
“An acquisition multiple starting from 10x would be more sensible for a takeover offer for the business. In our view, 5x NTM EV/EBITDA is near trough multiples for the stock.”
Peel Hunt notes though that the chair and chief executive collectively own 24% of the group, so irrevocable commitments are likely to be at least at this level with a formal offer.
“An acquisition multiple starting from 10x would be more appropriate, especially with 76% of revenues generated from long-term contracts and SaaS revenues," said the broker.
“This implies a price of around 130p per share.”