Boston, Massachusetts-based Aquent offered to pay $5 per share to acquire Mountain Lakes, New Jersey-based Computer Horizons, valuing the company at $152m based on its 30.1m outstanding shares, and a 67% premium to its market capitalization of $90.9m prior to the announcement of the offer on Friday April 11.
The deal itself will be particularly attractive to Computer Horizons shareholders since it has languished below $5 for more than two years. However, the company’s share price has reached as high as $4.85 in trading on Tuesday, as news of the proposed takeover filtered down to the markets.
The bid for Computer Horizons is considered hostile because the original terms were rejected by the company’s CEO and co-founder John Cassese, who owns 5.6% of the company’s shares and claimed to be acting on the behalf of Computer Horizons and its shareholders. Just prior to the offer in March, Cassese resigned from his position of director, and took a leave of absence from the role of CEO following a US Justice Department indictment and investigation in to allegations of insider trading. The charge relates to Cassese’s share dealings around the time of the merger between mainframe tools vendor Compuware Corp and Data Processing Resources Corp in June 1999. Neither company had any association with Computer Horizons.
In his letter to Computer Horizon’s directors, Aquent’s CEO John Chuang said: Consolidation in the IT services industry is occurring and will continue at an increasing pace – the size of an industry participant will significantly affect its future success. In our view [Computer Horizons] is simply not large enough to compete effectively as an independent IT services concern. Aquent said it has secured a $72.5m credit facility to help with the acquisition, for which it will pay cash. If successful, the acquisition will follow on from Aquent’s December 2001 purchase of IT staffing firm Renaissance Worldwide for about $100m.
Aquent, which currently owns 3.6% of Computer Horizons’ stock, also said it will nominate two independent candidates for positions on the company’s board of directors: Karl Meyer and Robert Trevisani. It also has put forward a proposed amendment to Computer Horizons bylaws that would enable shareholders with a 5% stake to call extraordinary general meetings. The proposal is seen as a further sweetener for smaller shareholders, considering that currently only shareholders with a 10% stake can call such meetings.
Computer Horizons has been struggling in a shrinking market for IT staffing services, and for the 12 months ended December 31, the company reported a net loss of $38m, compared to a net loss of $14.5m last time, on revenue that fell 26% to $297.1m. IT services, which includes its staffing business, saw revenue decline 26.6% to $201.3m, and solutions, which includes its recently sold in-house human resources management tool Chimes, declined 24% to $95.8m.
Indeed, for the past few years, Computer Horizons has been actively looking to bolster its finances through sales of operations. In March 2003, the company sold off the European customer base of Chimes to UK-based rival Parity for 15m pounds ($24.2m). In March 2002, the company made its biggest asset disposal of 250-person strong Princeton Softech to private equity firm Apax Partners Inc for $16m. However, it has also been making strides to turn around the company’s ailing fortunes, with the recent acquisition of an offshore software development center in Chennai, India from an existing insurance client, which at the same time signed a $15m contract with CHC for the next five to seven years.
Computer Horizons’ acting CEO, William Murphy, released a new statement on Tuesday saying that the Computer Horizons board will evaluate the proposal with its advisors and would respond to the proposal following the completion of its review.
Source: Computerwire