Shares in Iona Technologies surged by more than 30 per cent early yesterday after the firm confirmed that it has received a preliminary approach regarding a takeover of the company.
In a statement, Iona said the approach "may or may not lead to a formal offer" for the company and said it "does not anticipate making another announcement" unless a formal offer is received.
In a research note, Goodbody Stockbrokers analyst Gerry Hennigan said Germany's Software AG, database giant Oracle or Nasdaq-quoted Progress Software were "likely large cap suitors". Yesterday, informed market sources suggested that Software AG and Tibco were the bidders. Tibco is a US firm whose products compete with Iona's.
Tibco in particular may be attracted by the opportunity of acquiring a development centre in Ireland, with its attendant tax breaks. If either Tibco or Software AG were the successful buyer it would also have the best chance of retaining Iona staff who would be able to work on similar products.
Shares in Iona closed 18 per cent, or 37 cent stronger, at €2.37.
Industry sources questioned whether Oracle would bid, given that it has just acquired BEA Systems, whose products address the same market, for $8.5 billion.
Even in the current tight credit market the bidder could well be a purely financial one, such as a private equity fund or hedge fund. Iona has a market capitalisation of $118 million but it also has cash and other liquid assets of $56.5 million. Mr Hennigan said that other acquisitions in the sector valued companies at two times their sales, which would value Iona at about $155 million.
In a note, US investment firm Wedbush said Iona management should "seriously" explore strategic alternatives for their business. Its older Corba-based product line would attract industry bidders as it requires a low level of investment but still generates significant revenue.
Iona has come into play after several quarters of financial performance which have disappointed. It issued a profit warn- ing last month that fourth-quarter revenues would come in at $18 million, rather than the $20-22 million previously guided.
Chief executive Peter Zotto blamed the shortfall on "weakness in the financial services market". Iona's largest shareholders are Peninsula Capital and Goldman Sachs who both own more than 10 per cent, followed by company chairman Chris Horn who has 6.45 per cent.
