Northgate reveals takeover approaches

UK software developer Northgate Information Solutions said it had received a number of unsolicited approaches that might lead to a formal offer being made for the company, in a deal that could be valued at more than £469m (US$872m).

The Hemel-Hempstead based company, which makes software for human resources departments, local government and emergency services, said in a statement: “In response to the recent movement in its share price, the board of directors of Northgate confirms that, following a number of unsolicited approaches, it is in discussions that may or may not lead to a formal offer being made for the company.”

Altium Securities analyst Jonathan Imlah said he thought a private equity firm was likely to be behind one of the approaches, adding that Northgate could be valued at up to 100p a share.

“Northgate’s human resources division, which is the company’s biggest division, is probably worth 75p/80p a share and Northgate is probably worth closer to 100p a share in break-up value,” he said. “Northgate is strong on the public sector, which is a very attractive market and it cashflows are significantly undervalued”.

Bridgewell Securities agreed that a bidder was more likely to be a private equity group than a trade buyer. It added that, if it was the latter, then it could only think of Capita.

The broker said that in a bid situation, it thought the HR business could be sold to a US competitor for more and that the other businesses might attract a premium to their valuation. In total, Bridgewell thought a buyer could justify a price of up to 115p a share.