Private equity firm Vista Equity Partners upped the price it said it would pay for the learning software provider to $4.50 per share, or a total of $146 million.
That bid leapfrogs the $124 million offer made by private equity firm Accel-KKR in late April. Vista Equity Partners, which already owns about 13 percent of Mountain View, California-based SumTotal, originally proposed paying $3.25 per share for SumTotal on April 3. SumTotal shares traded at $2.01 just before Vista’s first offer.
Pat Walravens, equity analyst at investment firm JMP Securities, says the final price for SumTotal could be higher.
“Vista didn’t say this was its best and final offer, and we know that Accel KKR was willing to pay $7 per share last September,” Walravens wrote in a report Wednesday, May 6. “So the bidding process may continue.”
In a statement Wednesday, SumTotal said its board will review the new Vista offer.
SumTotal sells learning management systems and other talent management tools. Such products have been among the fastest-selling business software applications, but the recession has slowed sales.
Research firm Bersin & Associates initially forecast that talent management software spending would rise 20 percent in 2008 to $2.3 billion. But the final tally was just shy of $2 billion, representing 16 percent growth. For 2009, Bersin predicts a rise of about 14 percent to $2.26 billion.
SumTotal, whose customers include JPMorgan Chase, Kia Motors and Halliburton, announced a first-quarter net loss of $5.2 million, compared with net income of $1.5 million for the first quarter of 2008. Revenue fell 34 percent year-over-year to $23.7 million. Its stock, which is traded on the Nasdaq, closed up 19 percent Wednesday at $4.58.
SumTotal has been working to shift its business model from a focus on traditional software license sales to more of an emphasis on “software as a service,” which involves delivering applications over the Internet and charging subscription fees.
Vista has said it believes “the present management team lacks the requisite experience to effect a SaaS transition.” Vista, with offices in San Francisco and Chicago, also has said that current stockholders “have had little choice but to retain their positions” in SumTotal.
Last month, Vista said SumTotal refused to meet to discuss its initial bid. Vista also nominated three people to be elected to SumTotal’s board.
On April 24, SumTotal said it had agreed to be acquired by affiliates of Accel-KKR, which has offices in Menlo Park, California. But that agreement has a provision allowing SumTotal to solicit alternative proposals until May 24.
In a recent public filing with the U.S. Securities and Exchange Commission, SumTotal said that last year Accel-KKR “provided an oral indication of interest to acquire the company at $7 per share.”
Escalating offers for SumTotal are good news for the overall HR software industry, according to Josh Bersin, head of research firm Bersin & Associates.
Vendors have access to more capital, buyers benefit from more sustainable vendors, and investors feel more comfortable with the industry, he wrote in a recent blog posting.
“This is a very positive thing, both for SumTotal as well as for the general HR software marketplace,” Bersin wrote in late April.