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Gladstone

  • BY: Andrew Hore |
  • POSTED: 02/03/2010 |

Constellation Software Inc is making a mandatory offer of 33p a share for Gladstone.

TSX-listed Constellation offered 25p a share for the membership software developer at the end of 2008 but failed to pass the 50% acceptances mark and the bid was unsuccessful. Constellation retained 29.9% of Gladstone and the purchase of a further 13.64% of Gladstone for £2.17m has taken the stake to 43.48%. Constellation has to bid the same price for the remaining shares it does not own.

The sterling exchange rate with the dollar was just below $2/£ at the time Constellation bought its initial stake roughly two years ago. It paid around 25p a share at that time, which was equivalent to just over 50 cents a share. The exchange rate is now around $1.5/£ so the underlying cost of the latest purchase is 50 cents a share.

This indicates that the underlying cost of Gladstone to Constellation will not be much more at 33p a share than it would have been at 25p a share back in early 2008.

That makes the higher bid price look less generous than it might appear at first.

The exchange rate was in the range of $1.45/£ and $1.75/£ during the 25p a share bid near the end of 2008. When the bid was launched the exchange rate was around $1.7/£ so the expected cost would have been about 42 cents a share. Since then Gladstone has increased its cash pile.

The bid values Gladstone at £18.1m.

At 31.5p a share, up 3.5p on the day, Gladstone’s existing share capital is valued at £15.2m.

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