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November 14, 2011 3:00 pm
Sage, the business software company, on Monday said it was being sued by Archer Capital for its decision to end talks over a proposed acquisition of MYOB, an Australian management software business, this summer.
The Newcastle-based company said it “strongly rejected” the claim, which it understood to be for A$130m (£83m).
Sage was in talks to buy the Melbourne-based company this year but could not agree a price. MYOB was eventually sold to Bain Capital, the private equity company, for about $1.3bn. This was thought to be about $100m less than indicative offers from Sage.
Archer Capital, an Australian private equity firm which owned a stake in MYOB, now appears to be suing the company for the difference.
“It is a very curious one. Our position is that we are going to be resisting it very strongly indeed. We did not sign a contract with them,” said Paul Harrison, chief financial officer at Sage. “Any expressions of interest we made during the auction period were subject to contract and not binding,” he said.
An initial hearing has been scheduled for December 2 in Sydney.
Lawyers said the claim against Sage, coming months after talks ended, was highly unusual.
“Courts generally accept that you discuss a deal subject to contract, and the only binding agreements you have are on confidentiality or an exclusivity period that may be set,” said Andy Moseby, partner at Kemp, Little, the technology law firm. He said the action had minimal chance of succeeding.
“This seems very unusual, lots of M&A negotiations collapse at a late stage and neither party should be obliged to go ahead with the deal until definitive contracts are signed,” said Gavin Weir, partner at White and Case, the law firm. “In the absence of a legally binding agreement, or other extenuating circumstances, it is difficult to see the basis on which a seller could sue a bidder who changes its mind at the last minute.”
George O’Connor, analyst at Panmure Gordon, said it seemed to him to be “either the case of Archer trying it on, or talks with Sage were much further advanced”.
Sage is a highly acquisitive company but is known for its caution over the price it pays on transactions. It has walked away from a number of deals, including buying Visma of Norway and TeamSystem of Italy, because it could not agree on a price.
The MYOB deal would have been Sage’s largest to date and people close to the situation said there were concerns over whether shareholders would support the transaction.
Archer Capital could not be contacted for comment.
Shares in Sage closed down 1.39 per cent at 277.1p.
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