Directors say the offer undersells the SaaS franchise and would not be executable anyway
ReadyTech Holdings (ASX:RDY) received another takeover bid, this time from Dutch software group Total Specific Solutions. The structure is a dual-track offer of $2.00 per share via scheme of arrangement, or $1.75 per share via an off-market bid with a 50.1% minimum acceptance condition.
But that is a moot point because the board has already rejected it before telling investors. Their stated reasons are that the price does not reflect inherent value in a change of control context, and that the proposal would not be executable in any event. Shareholders have been told to sit tight and do nothing. Clearly management thinks it can turn things around…or maybe it might say yes for a slightly higher offer.
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For long-suffering RDY holders, the news cuts both ways. The stock has spent the past two years in a slow grind lower as growth slowed, FY27 targets were withdrawn and the market lost faith in the operating leverage story we have written about previously. A $2.00 cash bid finally puts a floor under the conversation.
But the board saying no, with Jefferies in the corner, signals that management thinks the franchise is worth materially more. Whether the bidder agrees, walks, or comes back harder is now the only question that matters.
Why $2.00 was never going to clear the board
ReadyTech listed in 2019 at $1.50 and traded as high as $3.30 in 2021. A $2.00 cash offer is barely a 33% premium to recent trading and well below where the stock changed hands when SaaS multiples were intact.
On the underlying business, recurring revenue still sits above 80% of group sales, and the enterprise products in Government and Justice continue to win mid-sized mandates. That is the kind of sticky, mission-critical SaaS book that strategic acquirers usually pay double-digit EBITDA multiples for, not a depressed-share-price premium.
We think the board’s other word is the more telling one. Saying the proposal is not executable suggests there are conditions attached, or financing gaps, that even at $2.00 would have made the deal hard to close. That gives the directors cover to push for a cleaner second look.
Total Specific Solutions is not a tourist bidder
Total Specific Solutions is part of Constellation Software’s European arm, Topicus, which has built a sprawling collection of vertical market software businesses across health, government and education. They are known for paying disciplined prices and rarely chasing assets up.
That is the worry for shareholders hoping for a bidding war. TSS does not typically get into auctions, and the dual-structure offer with a lower off-market price already signals they want a deal done cheaply or not at all.
Our take is that this is a probing first move rather than a final number. TSS knows the board will say no to $2.00. The question is whether they care enough about ReadyTech’s three verticals to come back with something starting with a two-and-a-half.
What happens to the share price from here
Expect the stock to gap up toward the $2.00 mark on opening, then trade in a band between the rejected price and whatever the market thinks a revised offer might land at. Risk arbitrage desks will be doing exactly this math today.
The downside if TSS walks is meaningful. Without a bid in the market, RDY trades back on its own fundamentals, and those fundamentals have not impressed investors for two years running. A return to the $1.20 to $1.40 range is entirely plausible if the suitor disappears.
The Investors Takeaway for ReadyTech Holdings
The directors have made a bold call by rejecting outright rather than engaging. That works if TSS, or another bidder flushed out by the news, returns with a number that respects the recurring revenue base and the entrenched government customer relationships. It backfires if the suitor walks and the stock drifts back to where it was last week.
We covered ReadyTech’s growth problems and the missing operating leverage in our previous note at stocksdownunder, and those issues have not gone away. What has changed is that an offshore strategic has now put a real number on the table. Whether TSS comes back at all will decide whether today marks a genuine turning point or just a brief headline.
