The chief executive of MRO Software signaled on Wednesday that the company would consider a hostile bid for rival Datastream Systems if its board refused to discuss MRO's buyout offer on friendly terms.
Datastream on Tuesday rejected the $122 million unsolicited bid launched last month by MRO. Both companies make software that allows manufacturers to purchase and manage their factory maintenance, repair and operations goods. The acquisition would expand MRO's customer base among small to mid-sized companies.
In a letter to Datastream's board Wednesday, MRO Chief Executive Chip Drapeau told Larry Blackwell, Datastream's CEO, that MRO wanted to proceed with friendly talks but warned, "Your board should understand that we are not limiting ourselves to a negotiated transaction."
Asked by Reuters whether his comments meant MRO was preparing to make a hostile bid for Datastream, Drapeau said MRO wasn't prepared to discuss its game plan, but that its immediate focus was to get Datastream's board to the table for face-to-face talks.
"We will evaluate day-to-day and at some point our patience will run out, and we will move to the next step," Drapeau said in a telephone interview.
MRO has offered $6 for each Datastream share -- $1 in cash and $5 in MRO common stock -- for a total of $122 million, based on Datastream's roughly 20 million shares outstanding.
Shares of Datastream closed up 12.2 percent, or 76 cents, at $6.99 on the Nasdaq. MRO closed down 5.88 percent, or $1.41 at $22.56.
In a letter to MRO management Tuesday, Datastream dismissed MRO's offer as insufficient, saying it did not reflect the inherent value of the Greenville, South Carolina-based business software company.
Drapeau said MRO was ready to raise its bid.
"We've made it clear that we would be willing to increase our offer if Datastream's management would come to the table, justify additional value, and negotiate on behalf of their stockholders," Drapeau said.
In the letter to Blackwell, MRO pointed to the positive market reaction -- Datastream's stock rose over 50 percent after MRO made its buyout offer -- as evidence that investors welcomed the idea of a takeover. MRO also highlighted Datastream's year-over-year decline in revenues as another reason why the company's board should consider the offer.
"I think that the message here is that we're serious, Drapeau said. "We obviously think that the deal has substantial merit and value to Datastream's shareholder base."
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