Assurance Global Services Raises Offer to Acquire CTG to $7.00 Per Share in Cash
Earlier this morning, Assurance Global Services (AGS) filed a 13-D/A that included a letter to the Board of Directors in which AGS presented a revised non-binding proposal to acquire CTG, Inc. (CTG) for $7.00 per share in cash. The proposed acquisition price represents a 33% premium to the prior day’s close and values CTG at approximately 9.1x and 7.5x our FY ’19 and FY ’20 adjusted EBITDA estimates, respectively. We note that AGS’ letter indicates that the proposed purchase price implies a multiple of over 10x our FY ’19 adjusted EBITDA estimate as the shareholder’s enterprise value calculation includes an adjustment for $10.2 million in pension liabilities. From a timing perspective, AGS believes a signed agreement may be reached within 45 calendar days of full engagement with CTG. The company has since confirmed receipt of the proposal and recommended that shareholders take no action at this time until the Board has had the opportunity to review the offer.
Recall that AGS, which together with joint filer Wax Asset Management beneficially owns 976,602 shares of CTG common stock, or approximately 6.6% of outstanding shares, initially submitted a non-binding proposal to acquire the company for $5.50-$6.00 per share in cash in May 2019. That offer was subsequently enhanced to $5.75-$6.00 per share in cash but was rejected by CTG on grounds that the proposal undervalued the company and that its business transformation would create more value for shareholders. We surmise the company’s stance will remain unchanged even with the higher offer, although the increased premium combined with the elimination of execution risk certainly warrant consideration. Our price target remains $8.00 based on a FY ’20 EV/EBITDA multiple of approximately 8x.
Our report with model and disclosures is available here.
Disclosure(s):
K. Liu & Company LLC (“the firm”) receives or intends to seek compensation from the companies covered in its research reports. The firm has received compensation from CTG, Inc. (CTG) in the past 12 months for “Sponsored Research.”
Sponsored Research produced by the firm is paid for by the subject company in the form of an initial retainer and a recurring monthly fee. The analysis and recommendations in our Sponsored Research reports are derived from the same process and methodologies utilized in all of our research reports whether sponsored or not. The subject company does not review any aspect of our Sponsored Research reports prior to publication.