Epiq Systems Inc., the Kansas City, Kan. provider of software for the legal industry, has rejected a $20-a-share takeover offer from an investment fund that is now its largest shareholder.
P2 Capital Partners LLC, a New York-based hedge fund, increased its Epiq stake to 16.9 percent – from about 4.9 percent – after its offer to take the company private was rebuffed. The offer was valued at $1.1 billion, including debt, according to P2 Capital’s regulatory filing Monday.
Epiq said in a statement Monday it received the investment fund’s proposal on Aug. 29. But after consulting with financial and legal advisors, the company’s board unanimously determined that the proposal “does not unlock the company’s long-term value, is inadequate from a financial point of view, and is not in the best interest of the company and its shareholders.”
New York-based P2 considers the shares undervalued and may seek discussions with other stockholders after previous talks with Epiq’s board and management didn’t culminate in a deal, according to Bloomberg News.
P2 has invested in Epiq since 2012, according to Bloomberg. P2 rarely takes activist stakes, describing its strategy as taking a private- equity approach to public companies.
Representatives for P2 declined to comment.
Shares in Epiq jumped $1.17, or about 7 percent Monday, closing at $18.46 on the Nasdaq Stock Market. The stock is up more than 41 percent over the past 12 months.
P2 Capital’s bid follows Epiq’s disclosure last Thursday that it was exploring a range of strategic options, including acquisitions, divestitures or a going-private transaction. However, it also said there was no timetable for completing its review and that it was also possible it would stand pat.
At the same time, Epiq adopted a poison pill to discourage anyone from acquiring more than 10 percent of its stock and to protect against "unfair or coercive takeover attempts."
Epiq’s second-biggest shareholder, St. Denis J. Villere & Co., took an activist stance with Epiq earlier this month. The New Orleans company said it had recently written to the board, urging it to “consider strategic alternatives for the company” including taking it private.
The investment firm also said it intends to nominate a slate of six directors by Nov. 1 for the 2015 annual shareholder’s meeting. The company holds 16.2 percent of the shares, according to its latest regulatory filing.
Villere executives said Monday this is the first time the firm has been more than a passive shareholder in a publicly traded company. It has been buying Epiq stock over the past 10 years.
“We think this is a good company that can become a great company,” said George Young, a Villere partner. He said a more aggressive board of directors can help find ways to unlock more value in Epiq for shareholders.
Epiq allows lawyers to share evidence discovery and other documents electronically, helping with litigation and compliance. Epiq Chairman and Chief Executive Officer Tom Olofson has run the company since 1988.
In the second quarter of 2014, Epiq reported a 10 percent increase in operating revenue to $115.5 million. But reorganization expenses resulted in a net loss of $3.4 million.
In its statement Monday, Epiq said it has “long welcomed and appreciated the views of its shareholders, including Villere and P2, and will certainly consider their proposals carefully.”
Peter Heckmann, an analyst and managing director at Avondale Partners LLC, said in a report Monday that the poison pill and the rejection of P2’s offer “suggests that management remains very reluctant to consider a sale of the company.”
Still, Heckmann said, Epiq “seems to be very much in play.”
Bloomberg News contributed to this story.
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