Texans set to take over southern tech firm

The independent directors of Christchurch-based NZX-listed internet search software company SLI Systems have recommended a $40 million takeover offer from a Texas company – but it looks like a done deal already.

The fate of the more than 60 staff in central Christchurch is unclear. No senior executives were available to answer questions.

Texas-based ESW already has obtained shareholder acceptances of more than 50 per cent, ‘‘thereby overcoming Takeovers Code restrictions on it acquiring a controlling stake in the company’’.

‘‘Should it so choose, it can waive the 90 per cent acceptance condition and declare the offer unconditional shortly after it is made,’’ a statement made by the directors to the NZX said. Eighteen shareholders own 51 per cent of SLI with individual holdings less than 5 per cent each, such as co-founder Shaun Ryan’s stake.

During the past four years the company has restructured its services and some senior staff, including replacing Ryan. It separated its retail search software from the services it offered, allowing clients a choice of managing it themselves or through other parties.

ESW is offering 65 cents a share. The share price has ranged between 37c to 53c during the past year, well down on the $2.85 at the beginning of 2014. The 2018 accounts showed a turnaround to profit of $4m from a $1.6m loss the previous year.

SLI independent chairman Greg Cross said the ESW offer provided an attractive opportunity for shareholders and optionholders to obtain the value of their shares ‘‘while eliminating the risks SLI faces pursuing its new product strategy.’’

An independent Northington Partners report for shareholders said ESW reserved the right to confirm its intentions for SLI following completion of the takeover. However, ESW’s stated intentions were to invest in SLI’s global business, ensuring long-term viability, and invest in product innovation.

ESW would appoint SLI board members, but not make ‘‘material changes to any material asset of SLI’’, review capital structure, and decide on termination of SLI’s chief executive Chris Brennan and chief financial officer Rod Garrett’s employment.

The independent directors recommended accepting the offer because of the 117 per cent premium to the October 19 share price. The premium built into the offer reflected the synergies and opportunities that ESW considered could be achieved after the takeover, they said.

‘‘The SLI board and executive team have for some time been considering a range of strategic options for the company as it has steered its managed services business into profitability and invested in the development of new products to return SLI to growth,’’ chairman Cross said.