EQT Private Equity has announced a voluntary public purchase offer and intention to delist SUSE.
Luxembourg, 17 August 2023 – Today SUSE S.A. (the Company or SUSE) has entered into a transaction framework agreement (the Transaction Framework Agreement) with its majority shareholder, Marcel LUX III SARL (Marcel) in relation to a voluntary public purchase offer and a delisting of SUSE from the Frankfurt Stock Exchange by merging it with an unlisted Luxembourg S.A.
Comment on an article in The Register about this subject:
De-listing and being fully controlled by a private equity firm is the opposite of being a private company in the normal sense. Private Equity is the latest euphemism for what used to be called leveraged buyout firms (LBOs). But leverage, as a euphemism for debt, became too well known, so now they call it PE. But it’s really a small amount of equity and a lot of debt coming from places like sovereign wealth funds.
PE is where companies go to die. PE operators are financial engineers who by definition don’t give a flying fleak about the companies they buy. They swoop in when the stock is low. Once in control, they pay themselves a huge fee (special dividend), sapping the company of any cash it might have left. They lay off huge amounts of the staff, and hope that revenue from old customers continues for a while even though there is little new work going on. The PE operators make sure to pay themselves huge consulting fees too out of the company coffers. Then they sell any saleable assets and shut the company’s doors if nobody steps up to purchase it.
Some of that comment is pure BS. These are sweeping arguments coming from someone who has no idea how diversified the investment market is, yet pulls everyone over as if everyone were Uncle Scrooge. I happen to know some pretty well off investors and they invest money in companies with a good future and to hopefully take them to even greater heights. You don’t do that by draining companies. At some point they sell and for a variety of reasons. Hopefully with a profit. But sometimes it is at a loss because all investments simply do not bring profit. My conclusion is that the guy takes his modern-capitalism-ideas from 1848.
Just as an example. EQT is not a dystopian PE. Take my word for it. I have attended their annual general meeting. They invest to own and run companies and to sell the company within a certain time frame.
I am not saying I know exactly how delisting a company works. But EQT will be offering 16€ per piece (at least they announced it) and I guess they might call a shareholders meeting if necessary. But I also think with their 78% they are able to request the delisting even if the private shareholders don’t want to delist.
In the end they will be delistet and if one doesn’t agree to sell shares that’s up to the shareholder. Might make sense in some cases, I don’t know. But if the company is not listet anymore you won’t be able to sell your shares on the regular stocks exchanges. Doesn’t mean you won’t be allowed to trade with them over the counter after the delisting, but I don’t think the conditions will be too good for a private shareholder with a small amount of shares.
Having done some research into the issue, the following is relevant –
SUSE S.A. is headquartered in Luxembourg – the stock is handled on the Frankfurt Stock Exchange.
Which begs the question as to which Stock Market rules have to be adhered to – those in Luxembourg or, those in Germany.
It’s fairly certain that, the governing Stock Market rules are such that, the shareholders do not have to agree to the de-listing from the Stock Exchange.
Please note that, just because the trade in a company’s shares has been removed from a Stock Market (de-listed), this doesn’t mean that the shares bought by investors cease to exist and, they can be bought and sold as unlisted shares – usually on smaller Stock Markets.
The current options are:
Sell the shares at the current market price – you may sell at a profit, or at a loss …
Wait for the major shareholder’s offer and either accept that offer – taking either a profit or, accepting a loss – or, do not accept the offer.
Keep the shares but, make sure that, you possess the share certificates – those shares can then be sold at a later date by means of “over-the-counter” (OTC) trading – also known as “off-exchange” or “pink sheet” trading. This makes sense only for the case of a voluntary de-listing.
For the case of a non-voluntary de-listing – insolvency – this course doesn’t make sense …
A couple of examples:
A bad example – Wirecard – a fraud scandal – everyone lost …
A better example – Microsoft’s purchase of LinkedIn –
In 2016, Microsoft offered the LinkedIn shareholders a share price of $196 to take over LinkedIn.
The next day the LinkedIn share price increased to near $193 – an increase of 47 % … «The same pattern has emerged with the SUSE share price … »
Parallel to that, Microsoft’s share price took a loss of 3.2 % and, Microsoft stopped trading shares for a day or two …
The LinkedIn shares were de-listed in 2016 …
I have worked for companies that were purchased by PE companies.
There are two situations where PE acquires a company:
As others have described, it’s a place where the purchase is to squeeze every last cent out of the company before shuttering it. CA (formerly Computer Associates) has long been known to be such a company.
As an investment. The plan in this instance is to grow the company and build market share, increasing the value of the company to sell off (typically in ~5-ish years).
From everything that I’ve read, this purchase is of the latter type.
My last employer was purchased by PE company that does both kinds of buyouts. After a few years, they took the company public, and the value was higher than what they paid for. They slowly sold off their public shares, and then the company was purchased by another PE company as an investment. They just completed the acquisition of a second company in the same space and are apparently merging the two companies together to increase the overall value (something that I thought was likely when it was announced the second company was being acquired).
I have no stock in SUSE or inside information about the transaction - merely sharing my experiences with PE investments. This is not necessarily a bad thing for SUSE, and probably (from what I’ve read about it) a very good thing.
One way in which this can be very good (depends on the PE company’s investment timeline) is that the company isn’t driven by quarterly revenue, which means they can often think longer-term. As a public company, it’s really hard to ignore the quarterly reports, and that “shareholder value” on a quarterly basis drives most of what the company does. PE firms can remove that pressure and let the company think longer term, if those working on the strategy can sell them on a long-term vision.
The fact that EQT is buying at above market value says a lot about the investment they’re making. They’re paying a 67% premium on the share price, which means they think the company is undervalued. That is a good thing, in my experience, and makes it seem likely that EQT is going to invest in SUSE’s ongoing/continued success. Reading the press release on it, it seems that shareholders are not being required to sell (which is something that’s outside my experience), so current minority investors can benefit from the sale as well.
Well, the fact is that IBM snapped Redhat for $34 billion, EQT purchased Suse for $2.96 billion.
You could say that Redhat was more popular, but the fact is that Redhat runs on twice as many Supercomputers as Suse. Twice! Not eleven times more. And Suse is closing the gap very fast thanks to their colaboration with HPE.
HPE has more Supercomputers then IBM, and makes more servers then IBM.
Now, Suse is taking the lead in the RPM world, I’m sure that all of this Redhat debacle will peter out now.
Many companies are switching to Suse already and OpenSuse users and people on this forum play actually massive role in this.
Remember, with the Quantum computing round the corner, the binary pc’s will be only used for storage and access.
Suse will be sold for $10-$12 billion in 3 to 4 years, and I have a gut feeling that HPE will be the next owner.