Japanese IT consulting firm Nomura Research Institute (NRI) has entered into a scheme implementation agreement with Australian-listed ASG Group to acquire 100 percent of the shares in ASG for an approximate total of AU$349 million.
Speaking to shareholders on Friday, ASG chairman Steve Johnson confirmed the offer is based on AU$1.63 in cash per ASG share and that it was a "compelling offer" providing shareholders with an opportunity to realise immediate value for their investment.
"ASG's independent board has unanimously recommended that ASG shareholders accept NRI's proposal in the absence of a superior proposal ... and accept that the proposal is in their best interests," he said.
"We look forward to leveraging NRI's financial power, extensive capabilities, and international experience in delivering new products and services to our existing customers as well as building new customer relationships and entering new markets internationally."
Chief executive officer Geoff Lewis said that he expects to stay on as CEO after the acquisition is finalised, and that ASG will also keep its name, at least for the medium term.
Previously, US giant Lockheed Martin discussed taking over ASG; however the deal never eventuated. Lewis said discussions with the defence company never went as far as those with NRI.
"It's nearly a dollar more," he joked.
"We've obviously been having conversations with a number of people ... This conversation has been going on for quite a while, but we're very happy with the outcome. This one has worked out well so we're very happy with the result."
When it comes to current ASG employees, Lewis said that the vibe is overall positive, with staff eager to go after some "tier one" contracts as part of the perks of belonging to a larger organisation.
"NRI will bring some capability in the consulting area that we think will be exciting," he said. "The capability with a parent company like that we can probably bid for larger opportunities, and we'll be looking a bit more seriously at that."
For the 2016 financial year, ASG reported record results, posting a 16 percent increase in revenue to AU$188.7 million, and net profit after tax of AU$12 million, up 26.1 percent year-on-year. Earnings before interest, tax, depreciation, and amortisation also grew 32 percent on the previous year to AU$26.7 million for the full year.
In addition, ASG reported it signed contracts worth more than AU$300 million in revenue, AU$180 million of which were new contracts and AU$120 million were extension of existing contracts, pointing out the average contract length was four years plus four-year renewal.
Some of the new contracts ASG won during the year were with the Department of Finance, the Victorian Department of Education and Training, CIMIC, State Super, and the Australian Bureau of Statistics (ABS).
As part of the deal with the ABS, ASG will be responsible for delivering a new enterprise data management environment using Oracle technology to help the ABS produce statistical information.
In turn, the expansion of multi-year contracts has locked in AU$185 million in revenue for FY17, with ASG saying it believes there is still a pipeline of opportunity valued at AU$370 million.
On Friday, Lewis confirmed that of its existing revenue, approximately 40 percent of it is made up by federal government contracts and 20-30 percent from state government contracts. He also said he does not expect the acquisition to affect ASG's government-related existing or future deals.
NRI is listed on the Tokyo Stock Exchange, with a market capitalisation of approximately 794 billion yen. It is expected that the acquisition be finalised by the end of 2016.