GEO Investing

GeoBargain Vocus (NASDAQ:VOCS) provides cloud marketing software that enables businesses to attract, engage, and retain customers.  It has entered into a definitive merger agreement to be acquired by GTCR Valor Merger Sub, Inc., an affiliate of GTCR LLC, in an all-cash transaction valued at approximately $446.5 million, or $18.00 per share.

We have been talking about VOCS as a potential buyout target since our original article on 6/27/2013.  Please see a history of our commentary on VOCS over last several months:

In our 3/13/2014 email we mentioned:

“ Reuters reports VOCS is looking to sell itself and has attracted interest from industry rivals and private equity firms, according to several people familiar with the matter.  Online marketing company ConstantContact, web services company Group Inc and private equity firm GTCR are among the parties interested in buying Vocus.

According to a second article released by Reuters ConstantContact and are willing to offer around $17 per share with bids due the first week of April.

We have been discussing VOCS as a potential takeover candidate since we published our 6/27/2013  articleVocus (VOCS): Another SaaS Train About To Leave the Station“.  We speculated that VOCS would be an ideal acquisition target with a price range of between $12.00 to $30.00.  Our most plausible price target mentioned in our article was $17.00 per share which valued the company’s slow growing legacy PR business at 1X sales and its new fast growing marketing suite product line at 8x sales.  Performing similar financial analysis using current financial information yields a few more valuation scenarios.  Valuing the legacy business based on EV/S of 1, and value the SaaS business based on EV/S of 6 and 8 gives us price targets for VOCS of $19.30, and $25.19, respectively.”

CTCT released a statement that same morning:

“…responded to the Reuters article published on March 12, 2014 regarding the potential sale of Vocus (VOCS). Constant Contact’s general policy is not to comment on speculation regarding merger and acquisition activity. However, given the detailed nature of the information reported by Reuters, Constant Contact management states that it has not been approached about acquiring Vocus nor has it indicated any interest in acquiring Vocus.”

We are more inclined to believe that Reuters has the basic story right.  We view the $14 price as an attractive opportunity for speculative investors to potentially profit from this information arbitrage.  Less speculative investors who want to play this trade may want to protect themselves with some put options.”

VOCS filed an 8K yesterday after the close updating certain executives employee agreements.  In the filing, each executive has  a termination clause that reads as follows:

“Upon the termination of Mr. Vintz’(there is similar verbiage for all executives, we just choose Mr. Vints as an example)  employment by the Company without “cause” or Mr. Vintz’ resignation for “good reason” (as those terms are defined in the Vintz Agreement), the Vintz Agreement provides for severance payments equal to 100% of Mr. Vintz’ then-current base salary as well as the continued vesting of unvested equity awards over the 12 month period after termination.”

We have seen in past cases, when rumors of a takeover are present and management files an 8k regarding change in control severance,  that the chances of a buyout are likely to happen.