Aconex, Oracle tie-up a done deal: analysts

Oracle’s balance sheet strength is likely to dissuade rivals from mounting a counter bid for Aconex, analysts believe.

Aconex co-founder and CEO Leigh Jasper at his office in Melbourne CBD Picture: David Geraghty, The Australian.

Aconex’s $1.6 billion sale to US technology giant Oracle looks like a done deal, with analysts ruling out the prospect of a counterbid or regulators standing in the way of the acquisition.

The Melbourne-based construction software maker (ACX) yesterday became the latest local technology company to hit global stardom, with Oracle pitching a $7.80 a share cash offer, a 47 per cent premium to Aconex’s last closing price of $5.29.

UBS analysts said the offer was hard to beat given that it has the backing of Aconex’s management and Oracle’s ability to match any competing bid.

“We believe Oracle’s balance sheet strength (net cash of $US10.8 billion) and matching rights would deter other, less well-capitalised potential suitors operating in the construction management and design software segments,” UBS’s Josh Kannourakis said in a client note.

RBC Capital Markets analyst Paul Mason has cited US-based construction technology player Viewpoint and Germany’s RIB iTWO as two potential rivals that may follow Oracle’s lead and pitch for Aconex. However, according to Mr Mason, Oracle remains in the box seat.

“We have previously looked at industry peers, and Aconex’s revenue base was materially larger than all other players in the direct construction collaboration vertical, making it difficult for another competitor to step in,” Mr Mason said.

“Oracle is based in an allied country (USA) and has been welcome to do business in Australia for years, meaning FIRB risks appear low.”

He also added that Aconex’s co-founders Leigh Jasper and Rob Phillpot had engineered a profitable exit for all shareholders at the right time.

“We see the $7.80 a share offer requiring more faith in the ACX business than the market had been willing to provide for some time, implying 20 per cent plus growth comes back and stays for some time.

“Oracle’s larger balance sheet may enable it to wear losses and lower margins in the short term that the ASX investment community were not, which could help re-accelerate ACX’s growth,” he said in a client note.

Macquarie analysts also agree that Oracle’s entry will remove execution risk for Aconex’s international expansion, which is critical to the continued success of the platform.

“The bid is a very good result for Aconex’s shareholders and we believe it’s unlikely another suitor will come in with a higher bid, considering the premium paid and low number of competitors in the space with the scale and financial backing to complete a $1.6b acquisition.”

The only contrarian voice in the market comes from Morgan Stanley analyst James Bales, who says a counter bid could still emerge.

“We see the key upside risk as a counter bid, this would not be completely unexpected, given, Aconex’s user base of 5.5 million and clear global leadership in the truly enterprise scale projects globally.”