Battle in Canada between content management rivals

A battle for control over Canadian content management software maker Hummingbird Ltd has begun after rival Open Text Corp tabled a hostile US $483 million bid that tops an earlier offer by Symphony Technology Group. Waterloo, Ontario-based Open Text is offering around US $483 million, or US $27.75 per share, in cash for Toronto-based Hummingbird. Hummingbird put itself up for sale earlier this year, and in May 25 Hummingbird announced that it had entered into negotiations to be bought by affiliates of California-based Symphony Technology Group. But Hummingbird has been under fire from disgruntled investors for not entertaining more birds. Many believe the company is being undersold.

In a fiery conference call last month, Hummingbird’s chairman Fred Sorkin was slammed for not soliciting rival bids from other strategic buyers. Some investors were unhappy with both the bidding process and the price accepted. At the time some analysts called the deal “a farce” and “ridiculous”. One even hinted at “legal liability” for Hummingbird’s board. The under-fire Sorkin retorted by saying that “the company was never on the block” and that the board had responded to incoming interest from potential buyers, of which Symphony was the most serious. But he also pointed out that the door remained open to other bids, saying: “If other people want to enter bids they can still do it to.”

Investors will certainly be happier with Open Text’s offer, which represents a premium of around twenty percent of over the closing price of Hummingbird’s share price of US $26.75 on the day prior to the Symphony agreement. It also beats Symphony’s offer of US $466 million, by over US $1 more per share. Hummingbird had 17.42m shares outstanding at the end of June.

Open Text CEO John Shackleton said that Hummingbird is a “strong strategic fit” and will expand the breadth of Open Text’s applications and extend the reach of its global partnerships. Some analysts believe the stage is now set for a fierce bidding war, with Hummingbird’s management team becoming more active in soliciting new or raised bids. Another analyst, Peter Misek at Canaccord Adams, believes that US $29 to US $30 is a “fair” price for Hummingbird’s shares. Palo, Alto, California-based Symphony said it currently controls around twenty percent of Hummingbird.