People Corp

People Corp (TSXV: PEO) is a Canada based provider of group benefits, group retirement and human resource services. It offers various employee services including career transition and career management, employee benefits consulting, group retirement solutions, integrated solutions, student benefits, recruitment, third party administration, wellness, and human resource (HR) consulting services.

Key highlights

• People Corporation to be Acquired by Goldman Sachs Merchant Banking: On December 14, 2020, People Corporation announced that it has entered into an arrangement agreement under which investment funds managed by the Goldman Sachs Merchant Banking Division (Goldman Sachs) will acquire all the issued and outstanding common shares of the company. The transaction is expected to close in the first calendar quarter of 2021. 

• Undeniable value to People Corporation shareholders: Goldman Sachs will acquire all the issued and outstanding common shares of the company for CAD 15.22 per share (all-cash consideration), representing a total equity value of approximately CAD 1.13 billion. The Purchase Price represents a 37% premium to the 20-day volume-weighted average price per share for the period ending on December 11, 2020, and a 36% premium to the closing price on December 11, 2020.

Financial Overview of Q4 2020 (In Thousands CAD Dollars)

Source: Company

• In Q4 2020, the company reported increased revenue by CAD 11.2 million or 26% to CAD 54.3 million, as compared to CAD 43.1 million in the previous corresponding period. The company realized growth through both organic as well as through acquisitions made by them.
• Adjusted EBITDA in Q4 2020, stood at CAD 16 million, increased by 1 million or 61.9%, as compared to CAD 9.9 million in Q4 2019. The increase in adjusted EBITDA was primarily driven by contributions from acquired operations, organic revenue growth and general and administrative expense savings.
• The Company reported a Net loss of CAD2.8 million in Q4 2020, as compared to net profit od CAD2.9 million in the previous corresponding period. This net loss was primarily due to increased fair value adjustments related to non-controlling interest and contingent consideration obligations coupled with higher depreciation and amortization expense, partially offset by higher adjusted EBITDA. 

Stock recommendation

As the deal indicate that the People Corp shareholders will receive CAD 15.22 in cash for per share, and the transaction is likely to complete in the first quarter of FY21. Since the stock is trading at CAD 15.07, which is in line with the offer, we suggest the investors take out profit from the stock and invest in another avenue. Hence, we recommend a ‘Sell’ recommendation at the closing price of CAD 15.07 on December 16, 2020.

Source: Refinitiv (Thomson Reuters)

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