Shares in Tinopolis shot up 8.5p, or 25%, to 42.5p after the Welsh TV production company recommended an offer from private equity investor Vitruvian Partners.
The cash offer is pitched at 45p a share, valuing the group at Gbp44.7m (US$88m). It represents a premium of 32.4% to last night's closing price of 34p.
In the year to last September, Tinopolis made an operating profit before interest and tax of Gbp2.2m on revenue of Gbp66m. The deal values the company at 20.3 times those profits.
Tinopolis also has Gbp10.9m of net cash on its balance sheet, giving it a lower enterprise value of just Gbp33.8m, and making the multiple seem much more generous.
The executive managers will re-invest Gbp4.3m of their shares in the bid company, Red Dragon Acquisitions.
Shareholders representing 55.6% of the share capital have given irrevocable undertakings to accept the offer.
Schroder Investment Management and SVM Asset Management hold 29.6% of the shares. Schroders said its irrevocable acceptance might lapse if an offer, which is 10% higher, is lodged.
KPMG is advising Vitruvian with Investec acting for Tinopolis.
Tinopolis chairman Ron Jones said: “In Vitruvian we have found the right partner for the next stage in this company's development. There are many opportunities out there and my entire team is enthusiastic about the future and what this partnership can achieve.”
Vitruvian managing partner Toby Wyles indicated that the group would look at further acquisitions using Tinopolis as a base investment.
He said: “We are keen to provide financial support to help accelerate the growth of Tinopolis and to exploit new opportunities as the content and new media markets continue to evolve rapidly.”
Source: Thomson Merger News