Active Networks: Vista Offer Provides Excellent Opportunity To Recoup Much Of Your Losses

Sep.30.13 | About: The Active (ACTV)

Active Networks (NYSE:ACTV) spiked up after the social and sport networking website agreed to sell itself to well-established software private equity firm Vista Equity Partners.

While those who participated in the public offering of May of 2011 are still seeing very small losses, they should move on and be glad with the exit opportunity provided by Vista Equity, and consequently tender their holdings.

The slowing revenue growth and lack of earnings, make it quite implausible that the company could have easily created enough value on a stand-alone basis to justify the proposed $14.50 price tag.

The Deal

Active networks announced that it has agreed to sell itself to Vista Equity Partners in a $1.05 billion deal. Under terms of the deal, shareholders stand to receive $14.50 per share in cash.

Vista Equity, which is a private equity firm focused on software, data, and technology-enabled businesses, will acquire the cloud-based Activity and Participants Management firm for little over a billion.

The board of Active has recommended that shareholders tender their shares in the offering, as the offer represents a roughly 200% premium since the first day of the year.

CEO Jon Belmonte commented on the sale, "This announcement represents a very positive event for our stockholders and allows ACTIVE to build on its success to date. We believe the partnership with Vista will position us to execute on our strategy and further enhance our industry leadership. For our customers, we will continue to focus on delivering the strongest product offerings through our advanced technology platform,"

Any shares which will not be tendered will be acquired in a second-step merger at a similar cash price to the offer. The deal is subject to normal closing conditions, and is expected to close in the fourth quarter of this year.

Despite the announced deal, Active Networks will still release its third quarter earnings on October the 30th, scheduled after the market close.

Valuation

Active Networks ended its second quarter with $108.1 million in cash and equivalents. The company operates with $4.1 million in capital lease obligations, for a solid net cash position of little over a $100 million.

Revenues for the first six months of the year came in at $238.4 million, up 10.4% on the year before. Net losses narrowed slightly from $22.7 million to $19.7 million.

The $1.05 billion price tag, values operating assets of the firm at some 950 million, valuing the operating assets at 2.3 times last year's revenues of $419 million.

Given the persistent losses, Active Networks does not pay a dividend at the moment.

Some Historical Perspective

While the premium being offered looks spectacular, especially compared to levels at the start of the year, holders of Active Networks' shares have seen little pleasure from their investment.

Shares were offered at $15 back in 2011, as investors had high hopes for the event social network. Unlike other professional network, LinkedIn (LNKD) which made its debut in the same month, the offering of Active Networks did not turn out to be such a success.

While shares quickly rose to $18 after the offering, they gradually gave up ground. Even after shares have tripled since the start of the year, the take-out level at $14.50 implies that initial investors are losing on their original investment.

What's Next?

Just last Friday, Bloomberg reported that two private-quite buyers have shown an interest in the company. Both Thoma Bravo LLC and Vista Equity Partners were rumored to make second-round bids, although the report cited the deadline was not until the 7th of October. Monday's news reveals that the latter was the winner in the process, thereby acquiring Active Networks.

Note that Vista Equity has been an established firm in the market for software, social networking and other internet companies. By acquiring Active it will become active, facilitating some 200,000 events hosted by many organizers in the business, social and sport-related activities.

For initial shareholders in the firm it was a volatile but unprofitable ride, although first-day investors have recouped a large degree of their losses compared to lows around $4-$5 in December of last year. After the company announced that it was researching strategic alternatives at the start of August, shares jumped up some 25% to $10.33 on the news, while investors now stand to receive $14.50 per share.

So cut your mental processes here, even if the offer value is 3.3% below the offering price. Investors have lost some cash as the company didn't turn out to be a winner, or didn't grow as quickly as anticipated at the time of the public offering. By tendering, investors can receive nearly all of their original investments, and they should count their luck by using this exit opportunity provided by Vista Equity Partners.

uld themselves as being lucky.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.