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Smoove confirms Pexa takeover talk

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Smoove [LON:SMV], the AIM-listed, software company providing data platforms to conveyancers, mortgage brokers and home-movers, announced yesterday (24th April) that it was in discussions with Pexa Group [ASX:PXA], the Australian digital property settlements platform, who is looking to acquire the Oxfordshire-based, real estate IT company.

The company issued a statement on the London Stock Exchange’s RNS platform which said: “The board of the company notes recent press speculation and confirms that it is in early discussions with PEXA Group Limited, regarding a possible cash offer for the entire issued and to be issued ordinary share capital of the company. Discussions with PEXA remain at an early stage. Accordingly, there can be no certainty that an offer will be made for the company, nor as to the terms on which an offer may be made.”

Stalking horse

It seems that Pexa is not the only dog in the fight, as the statement added: “The board of the company also confirms that it is considering an alternative potential transaction proposed to it by a separate third party. Such transaction, if pursued, would not result in an offer for the company under the rules of the City Code on Takeovers and Mergers.”

The company opened trading yesterday (24th April) at 34p, was up to near 47p before lunch, before closing out at 44p. That’s still a long way off the 72p that it was trading at this time last year. Smoove has offered a 25.4% year-to-date return and a -40.5% one-year return, with its shares ranging between 27p and 77p over a 52-week period.

The company has an GBP25.1m market capitalisation. Press speculation has implied that if the takeover is completed, Smoove would join the exodus of companies delisting from the AIM market.

Smoove had a tough 2022, as previously reported despite revenues climbing in November the company was still making a loss (GBP3m) on the back of slightly declining margins, inward investment and the shock to the property market that the Liz Truss budget wrought on it and the UK economy.

The company offers IT solutions to the UK home moving market. It includes Econveyancer, Smoove Start, Smoove Complete and Smoove Home.

However, the real estate market is making an anaemic recovery, according to RightMove [LON:RMV] and has been a traditionally strong part of the UK economy, which would lead to Smoove being seen as a piece of potential hot property.

World’s first

Pexa, which was the world’s first digital settlement platform was born out of a 2008 Council of Australian Governments’ initiative to transition property lodgement and settlement away from an outdated paper-based process to a more efficient digital settlement process. Today more than 80% of all property transactions in Australia are completed via PEXA.

Pexa entered the UK market last year, welcoming Shawbrook and Hinckley and Rugby Building Society as the first lenders on the platform. in 2022, Pexa acquired Optima Legal from Capital to facilitate the roll-out of its digital property exchange process in the UK and has also created partnerships with Iress, Ncino, Sopra Banking Software and Ohpen to identify opportunities to enhance integration with lenders and brokers and added PLS Solicitors, The Partnership, and Dutton Gregory Solicitors to its network as new customers.

Pexa itself isn’t a cash-generating machine, making a small profit last year with revenues only growing 3.2% in the last year and its shares performing poorly, losing 23% over the year.

Smoove advised that an ‘offer period’ has now begun with respect to the takeover under the City Code, giving Pexa a deadline of 17:00 on 22nd May 2023 to either make a firm intention to make an offer, or to withdraw from the process. Pexa has made no announcement regarding the Smoove transaction as at the time of publishing. According to the ASX Pexa’s shares were up nearly 1% to AUD13.63. The company has a market cap of AUD2.4bn (GBP1.3bn) and listed in July 2021.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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