Seems a low offer to me. Last report had them with around $1.5m in the bank. TMX would get perpetual use of the Razor software, ability to do what they like with the source code and the pick of the employees to install/customise it. Not sure this is worth $5m, as clearly there is now a lot of competition from the likes of Calypso et al, but not to be sneezed at, and that is all prior to stripping back to basics and sucking down whatever recurrent revenue streams there might be.
This is all the more strange given the nature of some of the shareholders that have (presumably) accepted the offer. GBST would surely be realising a big loss on their investment. Yencken likelwise would have invested a great deal in PTX prior to the merger. The current directors would have bought in at below the offer price, but their overall profit on the deal (around 1.5c a share) would be the order of tens of thousands of dollars. Given that they presumably lose their salaries when the thing is handed over, this all points to a distressed sale. The only explanation I can think of is that the revenues, which underwent big drops in the last couple of financial years is going to continue to fall, and the costs of servicing the revenue aren't easily reduced. It's an array of complex software products for managements of complex financial derivatives with demanding clients, as opposed to a single, shrink-wrapped package I guess. There are still some heavy hitters out there that are competitors to IBM and Markit that don't have this kind of offering, so I'm surprised, given the focus on counterparty risk and clearing, that nobody else has yet stepped up.
RZR Price at posting:
3.2¢ Sentiment: None Disclosure: Not Held
