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Vocus Inc. surged 47% on Apr 7 on the news that the cloud-based marketing solutions provider will be acquired by GTCR Valor Merger Sub, Inc., an associate of Chicago-based private equity firm, GTCR LLC. The agreement is valued at $446.5 million and GTCR will pay the amount in cash. The deal is expected to close in the second-quarter of fiscal 2014.
As per the agreement, GTCR will acquire all the shares of Vocus for $18.0 per share at a premium of 48% over the Apr 4, 2014, closing share price. GTCR will also purchase the company’s Convertible Preference shares for $77.3 million.
GTCR LLC is a privately-held equity firm, which invests in financial services and technology companies. It provides cloud-based marketing solutions and offers products and services to increase user satisfaction and improve marketing efficiencies.
We believe that Vocus is an ideal acquisition target for the marketing suite it provides and its steady customer base. The company is targeting more customers and cloud opportunities in the small and medium business space. Furthermore, the company continues to acquire more customers for its marketing suite, which reflects growing demand.
It is noteworthy that Vocus has a debt-free balance sheet and had $34.7 million in cash and short-term investments as of Dec 31, 2013. Additionally, Vocus’ transformation from a purely PR-centric business to a cloud-based marketing solutions provider is proving to be beneficial, especially with respect to total active subscribers.
Nonetheless, Vocus is facing ever-increasing competition from the likes of Marketo, Inc. ( MKTO - Snapshot Report) in the software-as-a-service (SaaS) market. User preference seems to have shifted toward SaaS-based Digital Marketing suites from standalone PR solutions. This practice is limiting Vocus’ growth prospects and profitability.
Moreover, Vocus reported adjusted loss per share of 4 cents in the fourth-quarter of 2013, which compared unfavorably with management’s guidance of earnings of 3 to 4 cents and earnings of 1 cent per share in the year-ago quarter.
Currently, Vocus carries a Zacks Rank #3 (Hold). Juniper Networks, Inc. ( JNPR - Analyst Report) and Western Digital Corp. ( WDC - Analyst Report) are better-ranked technology stocks carrying a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2 (Buy), respectively.