Buyout rumors this morning - DOX to offer over $1 billion. Does not appear to be much of a premium - would not expect PRSF to go this low:
globes.co.il
Company source: Amdocs to acquire rival for over $1 bln
Yanay Alfassy
24.05.2001 14:44
”Globes” has learned that billing company Amdocs (NYSE: DOX) plans to acquire a rival billing company for over $1 billion. It is believed that the takeover target is Portal Software (Nasdaq: PRSF), Amdocs’s largest competitor.
The scent of the acquisition has been in the air since the beginning of the year and would not dissipate. A senior Amdocs source told “Globes” yesterday that the company is currently in very advanced negotiations for acquiring a rival billing company for a price in excess of $1 billion. It was also learned that reports of the matter began circulating in the corridors of Amdocs’s Ra’anana branch.
Today Amdocs announced it was raising $500 million from institutional investors through a convertible bond issue.
If the rumor is true, what could Amdocs find of interest in Portal Software, especially in these times? First of all, the price. The Portal Software share has taken a precipitous plunge over the past year, losing 85% of its value. The company is now traded at a market value of $930 million, making it particularly attractive, even if Amdocs has to pay a premium of over 30%.
In many analysts’ opinion, Portal Software holds 80% of the billing market for IP networks, the next generation of communications networks. These networks combine voice and data communications on a single infrastructure. Amdocs realized over a year ago that the communications market could be expected to increasingly abandon traditional communications networks in favor of IP networks, with their forecasted high growth rates. The company announced the acquisition of private Canadian billing company Solect for $1 billion in shares.
Despite a number of large-scale contracts won by Amdocs, Solect did not manage to supply the goods Amdocs was looking for. Furthermore, Amdocs has already been beaten out by Portal Software in a number of major contracts. Amdocs’s most painful failure came at the beginning of 2001. In a tender that included all the major billing companies, communications conglomerate America Online (NYSE: AOL, later merged with Time-Warner) chose Portal Software’s product. In addition to AOL, Portal Software won the trust of a number of other communications companies, such as France Telecom (NYSE: FTE), British company Vodafone (LSE: VOD), and China’s largest communications company, JiTong.
On the other hand, Amdocs’s other competitors are not resting on their laurels. One of Amdoc’s biggest rivals, Convergys (Nasdaq: CVG), traded at a market value of $7.4 billion, recently announced its acquisition of British company Geneva Technology for $700 million in a share swap. According to the Convergys CEO, the reason for the merger is his company’s desire for a foothold in Europe, where Amdocs has a significant presence.
Until now, Amdoc’s wager on billing for traditional telecommunications companies has made it one of the most stable companies in the current crisis. Amdocs’s financial reports for the past quarter show revenue of $372.3 million, up 37.5% from the corresponding quarter last year and 8% from the preceding quarter.
Excluding good will expenses for an acquisition, Amdocs had a $67.6 million profit, amounting to $0.30 per share, $0.01 above the analysts’ forecasts of $0.29. The profit was 11% higher than the preceding quarter and 42.9% higher than the corresponding quarter last year. Quarterly net profit totaled $15.4 million.
In a rare conversation with the Bloomberg news service, Amdocs CEO Avi Naor said the company’s visibility for the next 12 months was very good. It should be kept in mind that such a statement is considered unusual at this time, since a large proportion of communications managers say they have no idea what will happen to their company in the coming months, in view of the state of the market. Naor can afford to indulge himself in this kind of announcement, because his forecast is based on Amdocs’s signed agreements guaranteeing the company 77% of its expected revenue over the period.
Amdocs’s main business with traditional communications companies of the Bezeq type enables Naor and Wall Street analysts to forecast the company’s growth with a relatively high degree of certainty. The forecast is 38% growth in the coming year on sales of $1.5 billion.
Until recently, the analysts predicted that 95% of the communications market would move over to IP networks by 2003. Even if analysts now forecast a delay of several years in this trend, it is still clear to everyone that the communications market is moving in this direction, although at a slower pace than previously anticipated.
Published by Israel's Business Arena on May 24, 2001 |
