"Show me the money!" Those words, made famous (and annoying) by Cuba Gooding Jr. in Jerry Maguire, represent the one wish in every investor's heart. It's the hope you put into a company by investing in it, a call to put up or shut up that few can meet. On Thursday, SS&C Technologies
SS&C has agreed to be purchased by Sunshine Acquisition Corp., the innocuously named affiliate of the Carlyle Group, a private equity firm with powerful inner-circle Washington connections. (Conspiracy theorists often associate Carlyle with all manner of not-so-sunny things. For an excellent satire on a very Carlyle Group-like outfit, read Florence of Arabia by Christopher Buckley.)
At first blush, there doesn't appear to be anything shady about this move. SS&C shareholders will receive $37.25 in cash for each of their shares, a 13% premium to SS&C's price the day before the announcement. In total, Sunshine/Carlyle will pay $941 million for the buyout. When Tom Gardner recommended SS&C in the October 2004 issue of Motley Fool Stock Advisor, he estimated that the company, which then had a market cap of less than $400 million, would be worth more than $1 billion in five years. As you can see, SS&C quickly leapt toward that goal.
There's one caveat I should note before giving this deal a clean bill of health. SS&C Chairman and CEO William Stone currently owns a 27% stake in SS&C. Once the deal closes, he'll own 28% of Sunshine. Stone's exchange of positions could be for tax reasons, but it will be worth watching how this deal plays out to make sure that shareholders are getting a fair deal.
Not that shareholders have much reason to complain; Stone and his cohorts have built a fine company over the years. SS&C makes software for hedge funds, insurance companies, banks, and others in the financial services industry. By acquiring and deftly integrating rivals, SS&C has created a company that competes ably with Advent Software
Since going public in May 1996, SS&C shares have returned nearly 12% a year. The stock has more than doubled since Tom picked it for Stock Advisor last fall. In the spirit of friendly sibling rivalry, Tom and his brother David break out how well each has performed since Stock Advisor was founded over three years ago. Tom's picks have surged 64% while David's have jumped 56% over that span, compared to a relatively paltry 20% return by the S&P 500. "Show me the money," indeed.
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