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Kape Technologies plc (Kape) is the latest UK-listed technology company to receive a takeover offer. Israeli billionaire Teddy Sagi, who made the offer for Kape through his wholly-owned company Unikmind Holdings Limited (Unikmind), cited ‘thin stock market trading’ as the reason he sees Kape’s future as private.

On 13 February 2023 Sagi’s was offer officially announced. He is already the majority shareholder of Kape, with his wholly-owned company Unikmind holding approximately 54.8% of Kape’s issued share capital. Unikmind’s offer of 285p per share for the remaining shares not already owned by Unikmind values Kape at £1.25bn and represents a premium of 9.7% to Kape’s closing share price on 10 February 2023 (the last business day before the commencement of the offer period). Investors reacted positively to news of the offer as Kape’s share price rose by 12% to 290p following the announcement.

Founders and other stakeholders have raised concerns that the value of UK tech companies is often underappreciated by investors, who must compare the promise of returns with the stable dividends that large established companies can provide, for example BP and Shell, whose stock gained 43% in the last year.

In its offer announcement, commenting on how to ensure Kape’s future successes Unikmind :

‘Unikmind now believes that the most appropriate way to support Kape in its buy-and-build strategy [following some acquisitions by Kape] is through long term capital investment conducted away from public markets.

Therefore, regardless of the outcome of the Offer, Unikmind intends to requisition a general meeting of Kape to seek to pass a resolution to delist Kape from AIM as soon as reasonably practicable following the Offer.’

Delisting allows companies like Kape to avoid the substantial costs of being a listed company. Listed companies are subject to many onerous regulatory requirements which are ongoing. There is also the public disclosure element to consider. It is essential, therefore, that companies find a strong reason for remaining on the London Stock Exchange. In the face of investors turning to stable dividends, Unikmind’s takeover private bid may prove to be an enticing option for Kape however, Kape’s board has shareholders to take no action in response to the offer for now.

It is apparent that Sagi sees a strong future for Kape. Following Kape rejecting his original offer of 265p per share, he was provided limited information about the business after he made a revised proposal of 285p. Kape also recently reported that it expects a surge in full-year revenue to nearly triple in its strongest year to date’.

 Mr Sagi has commented on the recent offer, :

The last decade has witnessed the rapid growth of digital services with the expansion of e-commerce. Kape has, with our support as the majority shareholder, transformed through several strategic acquisitions, into a truly global leader in the digital privacy and security space. Having weighed the pros and cons of a public listing under the current macro uncertainties and thin stock market trading as well as new growth avenues, we are firm in our view that Kape's next chapter in its corporate journey should be within the private arena. We are committed to Kape's further growth within our group of companies, enabling it to exploit operational synergies and to access capital for its continuous growth, especially as the convergence of technologies is gaining momentum. Recognising that not all Kape Shareholders may wish to continue with us in a non-listed Kape, our cash offer represents a compelling proposition for fellow shareholders to realise their investment.

However, some have questioned the quality of Unikmind’s takeover offer and described 285p per share as underwhelming, viewing Kape as having high growth prospects. Considering this, it is interesting that in comparison to other recent UK-listed companies that have been taken over in the last two years, Unikmind has only valued Kape on 9.3 times last year’s cash profit to enterprise valuation. This is almost half of the multiple that NortonLifeLock paid for Avast, another tech security company. Such an assessment indicates Unikmind’s offer may be rejected by Kape’s board who are still considering the offer.