A dog in the the Softchoice office in Toronto.DELLA ROLLINS/The Globe and Mail
Birch Hill Equity Partners is adding another name to its portfolio, buying Toronto's Softchoice Corp. for $412-million in cash.
The target, originally known for reselling Microsoft products in Canada, now offers a variety of technology-related services and products, such as outfitting Royal Bank of Canada branches with computers, printers, servers and the like.
Lately, though, it's been pushing hard to expand its services division, which can monitor a company's servers remotely and determine if there are any software problems that need to be fixed or any alerts that require a response.
At the moment this division contributes just 5 per cent of the company's net sales – much smaller than the 32 per cent that Microsoft sales contribute – but Softchoice has been pushing hard to expand the division since it bought UNIS LUMIN Inc. for about $25-million in December 2011 to create a presence in this market.
Softchoice chief executive officer David MacDonald said he wasn't looking to be taken out, but entertained the idea when Birch Hill approached him about a possible privatization. His new partners, he said, "are known to grow the plot line… instead of cutting costs to grow the bottom line."
Birch Hill deferred any comments to Softchoice, but it looks like they approve what the current management team is doing because Mr. MacDonald said everyone on his management team is sticking around. All that changes is who owns the company. At the moment, Softchoice has a small number of shareholders who control the votes, and the CEO said preliminary conversations with them suggest they are on board with the deal.
However, to entice them to approve the transaction, Birch Hill is offering a 27 per cent cash-adjusted premium to the volume weighted average stock price over the past 30 days. (Adjusting for cash means Softchoice's cash on hand is deducted from its market capitalization and the acquisition price.)
Before the stock popped Tuesday on the back of the news, the shares were already up 42 per cent this year.
(Tim Kiladze is a Globe and Mail Reporter.)
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Tim Kiladze