As highlighted in our Aug-09 entry, the high likelihood of a bid for Tandberg ASA materialized today with a recommended NOK 153.5 per share bid for Tandberg from Cisco, the US technology mammoth. The Cisco bid comes after 15 months of speculation of any possible bid for the company. The offer, which is not subject on any financing, is fully recommended by Tandberg's board. The offer is expected to close 1H10 and should not have any regulatory issues as Cisco has very limited presence in the videoconferencing market. Cisco also stipulated it has the right to match any competing bid within 4 days.
If succesful, we believe Cisco will have gotten Tandberg on the cheap as the offer only represents an 11% premium to Tandberg's last NOK 138.3 trade on 30 September 2009. Tandberg is being taken out at 19.2x 2010 EPS, which is in line with Tandberg's closest competitor, Polycom's trading valuation at 18.5x 2010 EPS. We believe there is a chance that other bidders like HP, Alcatel-Lucent or PE groups might emerge and counterbid steeper premiums for Tandberg's strategic value -which commands more than 40% market share in the structurally growing videoconferencing market.
Given the limited downside (represented by the bottom value of the NOK 153.5 offer), we would be buyers at the current NOK 154 price to play any potential counterbid for Tandberg ASA.
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