SMS Management & Technology has received an acquisition offer from Perth-based IT solution provider ASG Group, sparking a potential bidding war with suitor DWS.
DWS announced plans to acquire the struggling IT services provider in February for $1 in cash plus 0.39 DWS shares for each SMS share, valuing the company at $124 million.
However, ASG on Friday proposed a non-binding offer for $1.80 in cash for each SMS share, a deal also valued at $124 million. SMS shares were trading at $1.69 at the opening of trading on Monday morning.
An acquisition by ASG would still be subject to a number of conditions, such as completion of due diligence, internal approval and the execution of a binding implementation agreement.
SMS said it received advice from its advisors that ASG's proposal could lead to a superior offer, and that it would engage with ASG.
There is no certainty that an official offer from ASG will eventuate, and SMS still believes that DWS' proposal is the best option for shareholders.
SMS shareholders will vote whether to approve the merger on 14 June.
If the merger between DWS and SMS were to proceed, it would create a company with $463.7 million in annual revenue and nearly 2000 staff.
DWS chief executive Danny Wallis has a plan to turn SMS around after some less-than-impressive financial performance, including replacing the SMS board of directors with its own appointees and bringing onboard stronger managed services proposition and recruitment capability.
SMS' sales pipeline suffered a "serious deterioration" after its "national sales and delivery restructure" in 2016. The company reported a $44.5 million net loss in the half-year ending 31 December 2016 after impairing goodwill in its consulting business.
ASG was acquired by Japanese consulting and IT solutions group Nomura Research Institute in September 2016 for $350 million. ASG said it did not anticipate the need for approval from the Foreign Investment Review Board at this time.