More consolidation as Agresso closes in on CODA?

In a regulatory statement made on its website, UK enterprise financials vendor CODA today announced it has been approached by Agresso in what looks like a friendly takeover:

Coda plc (“CODA” or the “Company”) announces that on 18 December 2007 it received an indicative approach from Unit 4 Agresso N.V. (“Unit 4 Agresso”) at 205p per ordinary share in cash for the entire issued and to be issued ordinary share capital of CODA (the “Approach”).  The Approach is subject to a number of pre-conditions including the satisfactory completion of due diligence and financing.

The Board of CODA considered the Approach and concluded that a limited due diligence exercise should proceed.  This exercise is at an advanced stage.  There is no guarantee of any offer being made for the Company. Were such an offer to be made it is expected to be funded by Unit 4 Agresso’s existing cash balances and debt finance.

Together, CODA and Unit 4 Agresso would create one of Europe’s top ten business software vendors*, with turnover in excess of €300m (based on 2006 published figures) and operations in nineteen countries.

At the time of writing this post, CODAs shares are trading at 199p ($4) each and a market cap of £154 million ($309 million), suggesting the market believes this is a fair price. However, the best ask right now is 210p ($4.20) so one can't read too much into this at the moment. Agresso has a market cap of €447 million ($643 million) and was trading slightly down this morning.

Internally, I understand the deal is being sold as a near done deal and that it won't make any difference since CODA would be run as a separate unit. We've heard that before. Yet I am privy to certain management changes that indicate otherwise. Neither does it makes sense given both companies compete in accounts where Oracle regularly turns up. Some blood letting in sales and marketing is inevitable leaving a combined unit which would be in a much stronger position to fight off Oracle. The big question would be what happens to CODA's on-demand development which it is doing with assistance from Salesforce.com. That was announced last year at Dreamforce and as I understand it, good progress has been made. The mid-range needs to see an on-demand accounting application and again it is understood Salesforce.com is anxious to see this project reach the market.

Assuming the deal is consummated, it then leaves open the question about what happens to COA, the last substantial and independent UK accounting software provider. COA has done well in private hands and again plays in markets with which Agresso and CODA are familiar. A later approach to COA by a combined Agresso/CODA would be difficult to resist, assuming there was not too much product crossover.