ssb analysis, page-3

re: ssb analysis full text Opportunistic bid unlikely to be enough

† We view CDR's cash bid of $1.01 per share as opportunistic with VGL stock trading above the bid price only 6 weeks ago. The main condition on the bid is the achievement by CDR of a 90% relevant interest.

† While Volante's significant share price collapse is a function of its recent profit downgrade, we do not view the reasons for the shortfall as an endemic issue within the VGL business and believe that, had it not been so poorly communicated to the market, the shares would arguably not have traded below $1.

† Other potential bidders could include TLS, IBM GSA, EDS, CSC for whom the VGL IT outsourcing business (50%+ of earnings) would be attractive given the shift towards selective sourcing and VGL's solid mid-market presence, or could even arouse interest from a private equity player given the turnaround potential and ungeared balance sheet.

† The valuation remains cheap at the $1.01 bid price (FY06e EV/EBITDA of 3.8x on arguably trough earnings), and we believe existing VGL shareholders would be unwilling to sell at current levels. We view success as more likely at around the $1.20 mark.

† We retain our Buy rating and $1.22 target price.

...........................................................................
Hope the above help