Pegasus, the UK's second largest accounting software vendor, has received an acquisition offer from Australian group Solution 6 that values Pegasus at £30 million.
However, further bids may appear as the company's share price has rocketed 50 pence above the offer figure of 430 pence per share.
The Pegasus board issued a regulatory announcement to the Stock Exchange stating the boards of the two companies had reached agreement on a 430p per share cash offer for Solution 6 Holdings to acquire the Pegasus Group.
According to Chris Leak, marketing director at Pegasus, this is an amicable arrangement.
"We believe it is in Pegasus shareholders' best interests at this time," he said.
In September, Pegasus issued a notice saying it was in talks with a number of potential suitors. At the time, industry gossip suggested it was trying to ditch CSM, its professional and taxation accounting product group, to concentrate on mainstream products.
Solution 6, which makes a range of accounting and taxation products aimed at the professional accountant, has been looking for an entry into the UK mainstream market for some time.
Pegasus has long been the target of acquisition speculation. Three years ago, it was rumoured to be the subject of a hostile bid from arch rivals Sage.
At the time a bid of 475 pence per share was said to be on the table, a figure its chief executive Jonathan Hubbard-Ford derided as "grossly undervalued."
However, subsequent events showed there Sage never made a formal offer and even if it had succeeded, there would have been problems with the Mergers and Monopolies Commission since Sage already controls an estimated 90 per cent of the UK's small to medium sized accounting market.
"It was never realistic - there was a 99 per cent chance of it being thrown out by the MMC," said Leak.
In a radio interview this morning, Pegasus investor Bob Morton, who claims to own 12 per cent of the company, said that at the current share price, there will be another bid.
Sage issued a statement saying it is "thinking about making an offer." If Sage does bid then the company says it will be an all cash bid. The last time, a share swap was on offer.
Financial analyst Richard Holway notes that: "If Pegasus shareholders had taken Sage stock in 1996 and held on to it, their investment would have grown more than 15 fold. We will say no more except that at two times revenue, there looks like plenty of room for a counter bid."
The bid comes at an interesting time. Sage is powering away as the UK's leading software vendor and has no effective competition. A Pegasus-Solution 6 combination would allow the new group to make a powerful impact in the all important professional market, where accountants are seen as crucial influencers of small and medium size businesses.
To date, Sage has made many attempts to conquer this patch but has met with marginal success. The combination of the Solution 6 and CSM professional market penetration together with offerings for the SME market could provide a significant challenge.
One commentator who preferred to remain anonymous noted: "its about time Sage had its monopoly challenged."
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