Baring Asia agrees to buy Australia's SAI Global for $940m

The deal comes two years after a sale process - which was triggered by Pacific Equity Partners (PEP) making an offer for the business earlier in 2014 - ended with no final bids submitted. SAI's stock has dropped 9% since PEP tabled its initial bid, even accounting for a 1% gain since the new agreement was announced.

A Baring subsidiary will pay A$4.75 per share in cash for all outstanding shares in SAI, a 32.3 % premium to the September 23 closing price. The offer price represents an implied fully diluted market capitalization of A$1.01 billion and an enterprise valuation-to-EBITDA multiple of 9.4x for the 2016 financial year, according to a filing.

SAI was spun out from Standards Australia via an IPO in 2003. The company audits, certifies and registers products, systems and supply chains through independent assessment to help companies reduce risk and improve product and service quality. It has three business units: information services, which provides information required to comply with regulatory standards; compliance, which puts together technology-enabled business solutions and staff training; and assurance, which covers risk management, certification and related services.

Approximately two thirds of SAI's revenue comes from risk management services, with the Americas accounting for 30%, Asia Pacific 26%, and Europe, the Middle East and Africa 14%. The remaining one third of revenue is generated by an Australia-only property services business. Most of the information services revenue is tied to a contract with Standards Australia, the terms of which may change after 2018. This was an issue for prospective buyers who looked at the business two years ago, although the division's share of overall revenue has fallen since then.

"Already the established leader in Australia, we see a great opportunity to leverage our footprint and expertise within the industry to further enhance SAI's client portfolio and expand its market presence globally," Jean Eric Salata, founding partner and CEO of Baring, said in a statement.

PEP proposed paying A$5.10-5.25 per share via a scheme of arrangement in May 2014. SAI responded by setting up an open bidding process with a view to attracting other buyers. A consortium comprising PEP and KKR conducted extensive due diligence but did not submit a final offer; other interested parties put forward proposals to acquire certain assets. Last year the company received an unsolicited offer for its assurance business.

SAI reported revenue of A$570.2 million for the 12 months ended June 2016, up 4.1% year-on-year. EBITDA increased 19.7% to A$123.8 million over the same period, while net profit jumped 34.4% to A$53.2 million.

Baring is currently investing its sixth pan-regional fund, which closed in 2015 at $3.98 billion. The SAI acquisition is still subject to regulatory and shareholder approval.

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• Topics
• Buyouts
• Australasia
• Support services
• Technology
• Australia
• Baring Private Equity Asia
• professional services