Vero Software is a tiny IT company that provides software for the mould and die sector. They are on my radar because I'm a member of an investment club that has held their shares for the last year or so.
Their preliminary results came out today (http://investegate.co.uk/Article.aspx?id=201005101452136441L). The news was unspectacular - their revenue was down a bit, EBITDA up a bit, EPS down a bit. What caught my eye was this paragraph:
On 16th September 2009, the Company announced that it was in talks which may or may not lead to an offer for the Company. Discussions with more than one party subsequently followed and the Company is pleased to report that negotiations are now at an advanced stage and it expects to be able to make an announcement within the next two weeks. There can however be no certainty that an offer will be made nor as to the terms on which any offer might be made.
Now I was aware that Vero had been in talks about a potential offer, but at no point had they given a hint that negotiations were at an "advanced stage". So this came as a pleasant surprise.
Vero have been wibbling around at 12-13p per share for ages. Since talks about an offer have reached an advanced stage, I can only assume that someone is willing to offer a reasonable premium above the market price - lets say 18-24p. And if an announcement is due in under 2 weeks, the share price could move very quickly.
On that basis, I quite fancied a punt at ~15p, for a very quick 20-60% profit. Consistent with my aim for this year of realising most of my accumulated capital gains, I sold all of my Next shares (for a profit of 99%, including dividends) to free up some cash, and put up a little more than half the proceeds towards a buy order for Vero at 15p.
A bit under half my order was fulfilled before the end of the day's trading, and the rest remains outstanding as a limit order.
The shares I have manged to pick up now form 1.7% of my portfolio, and if the limit order is completed that will rise to 3.7%.
In 2 weeks time I might be looking rather foolish, but I think the shares look pretty cheap even ignoring the offer, so my downside should be limited. If it looks like I'm going to be lumbered with them for the long term then I'll make a more detailed post with my rationale for holding - at the moment this is purely a short-term play on this potential offer.
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