The Idion share was trading more than 17% higher this morning after management urged shareholders to reject "out of hand" the offer by Canadian company DataMirror Corporation to buy their shares at 65c each.
"The offer is so low that it makes us wonder whether this bid can possibly be serious," says Idion CEO Nicolaas Vlok.
A circular posted to Idion shareholders today includes a letter from independent advisors PricewaterhouseCoopers Corporate Finance stating that it believes that "the amount of the consideration is significantly less than the true value of Idion and accordingly is not fair and reasonable to the interests of the shareholders of Idion".
The Idion board says the 65c offer "is an attempt to buy a valuable asset at a ridiculously cheap price".
It adds that one of the factors leading to that conclusion is the fact that since Idion had R54 million cash in hand as at the end of last month, DataMirror "would inherit almost as much cash as they are offering Idion shareholders for the shares".
The circular focuses on five "pillars" of inherent value in Idion: financial strength, a large global client base within the Fortune 100, more than 100 global channel partners, technology and intellectual capital, and the experience and commitment of the management team.
Vlok says the board had rejected the offer without reservation.
"The decision was unanimous and had the full support of the three independent non-executive directors tasked to assess the merits of the bid."
He adds that the information in the circular gives shareholders some detail on the inherent value of Idion.
"It shows how we have built up the company and what its potential is."
Financial director Willem Richard says the company is in a strong financial position, contrary to statements by DataMirror.
"Not only do we have the largest cash reserves in our history, but our revenues are increasing as our customer base grows," he says. "We have sustainable cash growth for the foreseeable future, with a growing annuity-based income. This revenue stream has doubled to approximately $12 million over the past two years and will lessen the historic seasonality of Idion`s income."
The Idion circular describes the bid as "so significantly conditional that it is, at best, tentative".
It adds that the management within Idion and its subsidiaries who are shareholders in excess of 42% of the issued share capital have informed the board that they will reject the offer.
The board says the bid should be rejected because it is significantly below true value, Idion is positioned for dollar-based growth, Idion was recently ranked SA`s fourth most global company, the bid is an attempt to buy a valuable asset at a ridiculously cheap price, it is significantly conditional and tentative, and management and directors holding more than 42% of the shares will reject the offer.
"Idion can only be expropriated if DataMirror obtains more than 90% of the shares they do not own, which is impossible given the commitment by significant shareholders not to accept the DataMirror offer."
It says that if DataMirror proceeds with less than 90%, Idion will remain listed, the shareholders will be required to address possible conflicts between DataMirror and Vision Solutions, those conflicts could result in legal action against DataMirror by the Idion shareholders, and serious corporate governance concerns will emerge.
The Idion share was trading at 95c on the JSE this morning, 14c or 17.28% up from yesterday`s close.
Idion says the full text of the circular will be published on its Web site, www.idion.com.
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