The board of the leading Australian credit information provider, Veda Group Limited unanimously accepted Equifax Inc. 's EFX acquisition proposal yesterday, after the latter sweetened its offer.
The Atlanta-based data management company raised its takeover bid to AUD$2.825 per share which equals to an implied market capitalization of US$1.7 billion. Earlier on Sep 18, 2015, the company had proposed to acquire all the outstanding shares of Veda Group for AUD$2.70, which at the time translated to a total deal value of about AUD$2.3 billion or USD$1.6 billion.
The new offer represents a premium of about 41.6% over its Sep 17 closing price of AUD$1.995. This is substantially higher from the previous bid which represented a 35% premium over the Sep 17 closing price.
The revised bid represents a $75 million increase from the earlier offer. Both companies have moved forward after Veda Group's board allowed Equifax to engage in due diligence and negotiate a mutually acceptable definitive agreement.
If successfully executed, this would be Equifax's biggest acquisition surpassing the $1 billion CSC Credit Services buyout in 2012.
Veda Group, the leading Sydney-based data analytics provider, has principal operations in Australia and New Zealand. The company tracks credit information of about 20 million people and 5.7 million companies in the two countries.
Equifax is the world's largest data management company which organizes and assimilates data related to more than 600 million customers and 81 million businesses globally, especially in the U.S. and Europe. The company entered the Australian market last year with the buyout of U.K.-based debt management software company TDX Group, which has a regional office in Sydney.
Notably, financial checking in Australia has become stricter of late as the government is adopting a comprehensive credit reporting regime to counter money laundering and terrorist financing. So we believe that the recent move will give Equifax a substantial foothold in the country.
The recent bid comes at an opportune moment as the Australian dollar has weakened about 20% compared with last year. Additionally, on Sep 17, Veda Group shares were trading 20% lower than the 52-week high of AUD$2.50 hit on Sep 19, 2014.
Customers look for solutions that streamline data collection capabilities. We believe the addition of Veda Group's services will help Equifax to offer better data, technology and advisory solutions and position it as a leader in important markets.
Earlier, Equifax has made strategic acquisitions to supplement its core business. In 2014, Equifax acquired TDX Group and Forseva. The company expects to derive 1% to 2% revenue growth from these buyouts over the long term.
Additionally, Equifax expands internationally through joint ventures that keep operating costs down and need no integration time while diversifying the revenue source.
Management's efforts such as product innovation, expansion of data assets through acquisitions and continuous share gains in North America are encouraging. Also, the company's strong correlation to consumer and financial markets as well as its U.S. and European exposure are likely to boost growth, going ahead.
Currently, Equifax carries a Zacks Rank #2 (Buy).