The latest development at press time was Vista Equity’s move on May 20 to increase its offer for SumTotal to $4.85 a share in cash, valuing the Mountain View, Calif.-based provider of learning and performance management software at $163 million. Vista Equity also expressed a willingness to boost its consideration to $4.95 per share if the breakup-fee in SumTotal’s amended merger agreement with Accel-KKR is invalidated or reduced to the original amount.
The offer was a rapid response to Accel-KKR’s sweetened offer of $4.80 a share on May 19. That bid marked a 140 percent premium above SumTotal’s closing stock price on April 3, the last trading day before disclosure of its initial agreement with Accel-KKR. The stock was changing hands at $4.88 in intraday action on May 20. As part of its acceptance of the sweetened offer from Accel-KRR on May 19, SumTotal amended its merger agreement to include a termination fee of $6.67 million if it accepts a superior proposal from any other party.
Vista Equity, which currently owns a roughly 13 percent stake in SumTotal, originally offered to acquire the company for $3.25 per share on April 6. Menlo Park, Calif.-based mid-market buyout shop Accel-KKR then countered with an offer of $3.80 per share, which valued SumTotal at around $124 million, and the parties reached a definitive agreement on April 24. In early May, Vista Equity, which is headquartered in San Francisco, lifted the stakes even further and eventually arrived at a $4.75 per share proposal that led Accel-KRR to take its offer up to $4.80 per share on May 19.
SumTotal can continue to solicit alternative proposals from third parties until May 24, according to its agreement with Accel-KKR. RBC Capital Markets Corp. is advising the company on the sale. Formed in 2004, SumTotal posted a loss of $5.2 million for the first quarter ended March 31, down from its year-ago equivalent profit of $1.5 million. Revenue for the quarter totaled $23.7 million, off more than 20 percent from $36 million last year. The company said cash flow from operationg activities rose, however, to $4.1 million in the latest three months from $3.6 million a year ago.
As evidenced by the intense bidding, the company is an ideal target for Vista Equity and Accel-KKR, both of which target mid-market software companies. Accel-KKR typically invests in companies with annual revenues between $15 million and $150 million in software and Internet technologies. Vista conducts buyouts, growth acquisitions or financings, restructurings and spinouts, with a particular emphasis on software. Both firms were formed in 2000.