Elmo shares catch fire on takeover talk

Company News

by Glenn Dyer

Shares in Elmo Software (ASX:ELO) jumped more than 30% on Thursday after the company confirmed that it had a parade of suitors sniffing around, including the private equity firm Accel-KKR.

The human resourcing tech company confirmed the approaches in a statement to the ASX after trading in the shares was halted for the first hour of trading yesterday at the company’s request.

Elmo had requested the pause due to media speculation regarding “possible corporate activity”.

In a statement issued around 11am Elmo confirmed that it had “received approaches expressing interest in acquiring the company from various parties, including Accel-KKR”.

That saw the shares take off, reaching a high for the day of $3.18 before easing a touch to close up 28% at $3.09, well above the $2 IPO price in 2017.

Elmo said it’s in discussions “with selected parties in the context of maximising shareholder value”.

But directors cautioned that “no agreement has been reached in relation to any transaction, and there is no certainty that any proposal received will result in a binding offer or that any such offer would be recommended to shareholders.”

That’s standard fare in situations like this and it seems the company clear has managed to set up some sort of auction amongst potential bidders.

Whatever happens, any takeover will be based more on promise than on actual performance.

Despite reporting a 32% jump in revenue for the year to June, it still recorded a nasty net loss of $79 million.

While yesterday’s surge in the price of the shares boosted the October gains to around 40%, that only trimmed the loss since the start of this year to nearly a third – more than double the 14% drop in the All Ordinaries Index year to date.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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