ASG set for $350 million Japanese takeover

Japan’s Nomura Research Institute is set to pay $350 million to acquire Perth-based IT services provider ASG Group.

ASG chief executive Geoff Lewis

The offer values ASG at more than 13 times earnings before interest, tax, depreciation and amortisation. NRI has hired ANZ corporate finance to advise on the deal while Citigroup Perth will advise ASG.

The Aussie systems integrator holds major contracts with enterprise players like Qantas and the federal government's Department of Finance, Department of Communications, and Department of Defence, plus the WA Department of Education, among others.

ASG chairman Ian Campbell said the "compelling offer" would allow ASG to make the most of NRI's global scale.

"These capabilities and experience will broaden and deepen ASG's offering to our customer base," he said.

"It will also bring new professional opportunities for our staff of almost 1000 people given NRI's ambitions to grown the ASG business."

ASG offers consulting, managed services, hosting and cloud services, and reported a record revenue of $188.7 million in 2016, up 16 percent on the previous year.

It also posted a 32 percent increase in EBITDA to $26.7 million, and net debt of $2.9 million - well below the group’s forecast of $5 million.

The company’s annual review also reported $185 million in revenue already locked in for FY17, credited to the expansion of multi-year contracts.

NRI is a Japanese-based consulting and IT solutions group listed on the Tokyo Stock Exchange with a market capitalisation of about ¥794 billion (A$10.2 billion) as of 29 September 2016. 

An internal business committee has unanimously recommended that ASG shareholders vote in favour of the sale, provided an independent expert declares the scheme is in the best interest of the shareholders and that no superior proposal arises.

If approved, the acquisition will deliver for major shareholder, ASG managing director Geoff Lewis, as well as other big investors Ausbil Investment Management and Pengana Capital.

In 2012, ASG declined a takeover bid from Lockheed Martin, later claiming the giant US contractor had “materially undervalued” ASG shares.