The Deal: Investors Expectations High for Active Network

NEW YORK ( The Deal) -- There appears to be no shortage of strategic options for event software management company Active Network ( ACTV), whether it's a possible takeover by a large media player, a merger with a rival, or even a take-private deal.

Investors certainly expect something big to happen, bidding up the stock 31.5% since Active Network said on Aug. 1 that it would study its options and 129% overall since the year started.

The company could probably fetch somewhere between $700 million and $1 billion in a sale, according to David Stastny, managing director and founding partner of Palo Alto, Calif.-based Centaur Partners LLC, which advises on deals in the software space, such as counseling Coupa Software on its April 10 acquisition of Xpenser, for undisclosed terms.

Despite the run-up in Active Network's stock, "it's not making money, so most logically, it's going to be a strategic buyer" that will bid for the company, Stastny said in a phone interview. "Private equity wants cash flow."

Active Network, whose software helps various sporting, outdoor, community and business organizations manage events and increase participation, posted a loss of about $4.5 million for the quarter ended June 30, representing its eighth consecutive quarterly loss.

San Diego-based Active Network, which trades on the New York Stock Exchange under the symbol ACTV, officially hit the block on Aug. 1 after announcing its board had formed a committee and engaged Citigroup Inc. to review strategic alternatives.

While Active Network noted in the statement that it had received expressions of interest from outside parties regarding investment possibilities and a sale of the company, no developments since the announcement almost two months ago have been revealed. Company officials declined to comment on the process.

But investors seem to believe there is plenty of value waiting to be unlocked. At the start of the year, Active Network was trading at $4.91. By July 31, it had closed at $8.53. It had reached $11.22 midday Thursday.

Amid a resurgence in trade shows and conferences, media companies looking to gain a foothold in the event planning space are the most likely to have an interest in buying Active Network given its growth potential, according to Jonathan Hodson-Walker, managing partner and senior principal of Silverwood Partners LLC, another firm that advises on software deals, recently representing Cogent Research LLC on its sale to private equity-backed Market Strategies International.

"There is a lot of interest in events generally," Hodson-Walker said by phone. "The media business gets more and more affected by technology. Live and produced events are a way of getting access to advertising streams."

Global publishing and conference company Informa plc, which has historically shown an interest in event management, could be a potential suitor for Active Network, Hodson-Walker said.

The Zug, Switzerland-based media company on June 10, 2011, acquired trade show organizer Brasil Trade Shows Partners Particiapacoes from DLJ South American Partners, as well as Ibratexpo Feiras e Eventos Ltda, for a combined value of R$210 million ($94.1 million).

Another option that might make sense, watchers said, is a merger with rival event management company Cvent Inc., which on Aug. 9 raised $135 million in its initial public offering.

"You could merge the two together and get some consolidation," Hodson-Walker said, noting that a combined entity would have pricing leverage in the marketplace and could potentially be more attractive to investors.

RBC Capital Markets analyst Andre Sequin also thinks a merger with Cvent is a possibility, given the two event managers don't directly cross over in every aspect.

"If they aren't competing, the two of them combined become a bigger force, giving them an opportunity to cut out costs," Sequin said.

Given the dominance a potential combination would have, however, "you have to wonder if it would be approved" by regulators, he added.

Offiicals at Informa and Cvent didn't return calls or e-mails.

Sequin, however, doesn't think Active Network would fit in well with larger Internet players such as Google Inc. because those powers don't really operate in the ticketing and event space.

"Any kind of purchase price right now would actually have to come at a pretty significant premium," he added.

Even an offer of $14 or $15 a share would likely draw disappointment from some long-time holders who think company is worth quite a bit more, he said.

"I have a hard time imagining who would buy them," Sequin said. "What's more likely is a take-private. There's a lot of value in this company."

As of June 30, Active Network's cash balance totaled about $108.1 million, while debt amounted to just $4.1 million.

The 24-year-old company had a market capitalization of about $700 million as of midday trading Thursday. It posted revenue of about $132.4 million for the quarter ended June 30, up from $121.6 million a year earlier. Its second-quarter loss widened to $4.5 million, from $2.3 million.

--Written by Sarah Pringle

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