Having seen the stock drop from above $3 in August 2020 to below $1 in June, investors will likely be relieved that Newman appears to have secured a reliable bid with deep pockets.
Two reasons this is not a surprise
While Nearmap certainly surprised the market by suddenly announcing a deal that has been cooking in the background for some time, having such an offer wouldn’t come as a complete shocker for two reasons.
First, consolidation into the major US mapping market seemed inevitable for some time. There are four major players in this market, with Eagleview the next best and biggest Nearmap; The pair have a complicated history and Eagleview is suing Nearmap for patent infringement.
These four companies have been essentially flying their own planes over the same parts of America, and have done the same basic thing for some time. As such, potential consolidation has long been a topic for the sector.
This was not lost on Neumann. According to sources, for the past 12 months he has been out and about in this market and talking to potential parties, which led to discussions with Thoma Bravo.
The company, which manages $100 billion ($140.5 billion), is no stranger to the sector; When the Eagleview went up for sale seven years ago, Thoma Bravo was the low price tag.
According to the Nearmap camp, it sees the potential to further grow Nearmap in the US, using the game plan it previously developed for Eagleview.
Sources said Thoma Bravo has no concerns about Iglevio’s legal case. US investors seem to have a much more moderate view of such things, which are more common in the US and are often seen as evidence of the competitive threat posed by one player to the other.
Thoma Bravo has also shown that he has no problems looking for technical strikes in listed markets to pay for failing companies.
It announced last Wednesday night that it would pay $2.8 billion for a software company called Ping Identity, whose stake dropped from $30.25 in April to just $16.48 in June; Thoma Bravo pays $28 per share for the group.
Nearmap has given Thoma Bravo an exclusive seven-day due diligence period, having already provided the company with non-exclusive due diligence over the past six weeks. This tactic is somewhat unusual but seems designed to accomplish two things: put acid on Thoma Bravo to make his bid final and weed out any other potential bidders.
The sources indicated that Neumann had spoken with a number of parties during market measurements. By announcing the bid on Monday, Nearmap appears to be trying to bring these bidders to the table while making clear what price they’ll need to beat.
If a binding offer is not proposed [from Thoma Bravo] Within the exclusive seven days, the board, in our view, is likely to run a full sale to drive out other potential offers and maximize the sale price, Gary Sheriff, an analyst at RBC Capital Markets, said Monday.