Is it possible that MINDBODY (MB 36.83, +0.10, +0.29%) could get an even higher bid?
Investors got a nice early Christmas present on Christmas Eve when the company
announced it had agreed to be acquired by a private equity firm. MB accepted
Vista Equity Partners's bid of $36.50 per share in cash, which was a 68%
premium at the time.
In an SEC filing today, Luxor Capital, which is a major shareholder in MB with an 18.59% stake, believes that the proposed merger significantly undervalues the company. Luxor says it intends to engage in discussions with shareholders, the board of directors, management, and other interested parties regarding the acquisition and other strategic matters.
At the time, Briefing.com was surprised such a strong offer was made. The stock had been languishing in recent months, falling from $40 in early October to around $22 when the deal was announced. We were actually pretty impressed that MB was able to garner a 68% premium. It was even an all-cash deal, not stock in another company.
The company’s software and payments platform helps operation of wellness businesses such as a health club.. The MindBody app would allow the health club to allow its customers to check-in when they arrive or perhaps book/pay for a yoga class. Its app also integrates with treadmills so people can track their calorie burns. It also helps clients manage/schedule their employees, handle payroll, provide payment processing services for gym members, provide analytics etc.
The company has stumbled a bit lately. When it reported Q3 results in early November, it guided Q4 revenue below market expectations. MB conceded that it has been facing significant operating challenges in the past two quarters. The combined effects of recent acquisitions, go-to-market reorganization and expanding consumer and partner initiatives, have made MINDBODY a considerably more complex business to operate than it was just six months ago. The company did not meet its own growth expectations in Q2 and Q3. MB said it expected this to continue lagging a bit in Q4.
In one sense, this was a good time for Vista Equity to swoop in. You want to buy low, when a company is struggling and then reap the rewards when the company gets back on track. It's even possible that Vista Equity could spin them back out in an IPO in a few years when the company's operating troubles are behind it. Luxor presumably understands this too and they want a higher bid.
It will be interesting to see if Luxor is able to get Vista to increase its offer. The stock is currently trading slightly above the $36.50 offering price, it's at $36.90 in the pre-market. That tells us there is some moderate belief that maybe a higher bid will come in. On a final note, the Vista Equity deal does include a 30-day go-shop period, so management does have the ability to find a better deal. About two weeks are left in the go-shop period, so we'll see if a competing bid comes in.
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