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Gameforge increases price for Frogster by 10% after unsuccessful takeover offer

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On 16 August 2010, Gameforge made a public takeover offer for the outstanding Frogster AG shares at a price of €25 per share. In a previous post to this topic I did a detailed financial analysis of the deal and came up with the idea that Gameforge could use Frogster AG to get a public listing of the Gameforge group via a reverse merger. Since then, Forgster management opposed this deal making it a hostile takeover offer and equity analysts (all three of them) saw the fair Forgster share price 50%(!) above the offer. One month later, 13 September 2010, only 1,326 shares of Frogster (that is only 0.05% of the company) could be acquired over the course of the offer. In case Gameforge really aimed at taking over Frogster in full, this takeover offer can really be deemed unsuccessful.

The modified takeover offer

Gameforge has increased the offer price by 10% from €25.00 per share to €27.50 per share increasing the overall valuation of Frogster AG from €70 MM to €77 MM. This price will make the offer more attractive to existing shareholders, however is still far below what equity research analysts deem a fair price for the stock. As a result of the modification of the offer, the term of acceptance for the shareholders has to be prolonged by 2 weeks. Shareholders are now able to offer their shares to Gameforge basically until 22 October 2010. Then we will know how much shares Gameforge was able to acquire and what next steps will be. 

Takeover offer now friendly?

Interestingly enough, both Gameforge and Frogster management have now switched the offer from being a hostile takeover approach to a friendly offer. In the respective press releases, Forgster management announced that it will sell its own shares at that price and that significant cooperation agreements between the companies have been made. Unfortunately no details have been disclosed.

Background on Gameforge financials

There is one interesting side effect of the public takeover offer: everybody who is diligent enough to actually look at the official takeover document, which is publicly available on the Gameforge website, gets insight into the financial situation of Gameforge. Based on the disclosed information, Gameforge has cash on its balance sheet of €28 MM, which confirms my estimation of Gameforge’s financial performance in my previous post.

The official documents published by Gameforge regarding the takeover offer can be found here

Written by Malte

September 15th, 2010 at 8:23 am

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