Why Equifax Wants to Take Over the Veda Group

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Mid this morning, Veda Group Limited [ASX:VED] went in to a trading halt. VED’s official release said it might not be back to trading until Tuesday morning. But just two hours later, the company made an exciting announcement.

Equifax [NYSE:EFX] wants to buy Veda. And they’re prepared to pay up, big time. Here’s what Veda’s management had to say:

Veda Group Limited…today received orally a conditional and non-binding Expression of Interest from Equifax Inc…under which Equifax proposes to acquire 100% of the shares in Veda…at a price of $2.70 per share, with the consideration being in cash’.

$2.70 per share. That doesn’t sound too bad. Veda has only been on the ASX since December. Its all-time high price was $2.51 per share.

The announcement gave a boost to VED when trading resumed. As at 2:28pm, VED is trading up 32.83% at $2.65.

veda group VED 18 09 2015
Source: Google Finance
[Click to enlarge]

The board of Veda still has to take a close look at the deal before making an official recommendation. However, they’ve said that ‘Veda has a very attractive future…the Company is well positioned to continue to deliver strong growth’.

It’s possible that they’ll push for a slightly higher price. If they do that, they’ll have to justify it when they make their recommendation to shareholders. It will be interesting to see what stats they come up with. Seeing as VED hasn’t even been public for a full year.

It’s somewhat clear why Equifax would want to buy Veda. Like Veda, Equifax is a credit reporting company. It provides services to individuals, businesses, and governments. It’s one of the three largest credit agencies in the US. Founded in 1899, it’s been public since 1965.

Equifax has been an international company for over a decade. Its expansion has seen it dominate over a dozen markets around the world.

Source: Equifax
[Click to enlarge]

However, by the time Equifax started expanding overseas, credit services was already a mature industry. The only real way for them to expand was to take over other providers. Hence moves like the one reported today.

The company has also begun offering complementary financial information services. Including credit monitoring and identity theft protection.

Veda is widely considered to be Australia’s leading credit information provider. Though it’s worth noting that VED bills itself more generally as a data analytics business. In addition to credit services, they offer tenant checks for landlords, used car history reports, and other products. Though VED only went public recently, it’s existed in a number of different forms since 1967.

If you’d bought into Veda at its IPO, chances are you’d be feeling pretty happy right now. The VED share price has lifted by just over 32% so far. Now, shareholders may be in for a lucrative opportunity. This is just one more example of how being active with your investments, and not just following the herd, can pay off.

Want to know what else it takes to make yourself a great investor? Money Morning small-caps analyst and editor Sam Volkering has prepared a handy guide. It’s a free report, titled ‘How to Become a Great Investor in Two Simple Steps’.

In this report, you’ll learn why diversifying your investments could be a big mistake. Plus how to figure out your asset allocation in less than ten minutes. And why ‘set and forget’ investing is particularly dangerous in today’s markets. It’s a must read if you feel like you’re stuck in a rut and want to improve your strategy.

Veda probably won’t announce a formal offer for some time yet. While you wait, spend some time improving your approach to active investing in general. Find out how to download your free copy of ‘How to Become a Great Investor in Two Simple Steps’ today.

Eva Mellors,
Contributor, Money Morning

About Eva Mellors

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