KKR to Acquire MDF Commerce

KKR announced it would acquire MDF Commerce, which is publicly traded on the Toronto Exchange. I have previously written about the company here.

About MDF Commerce

You are forgiven if you are unfamiliar with the company.  It’s headquartered in Quebec and is a micro-cap stock in Canada.  The company used to be called Mediagrif.  If you are a procurement nerd, you may know the company from some of its brand names:  Periscope (which it bought a few years ago) or Merx, a Canadian public sector RFP website.  Here’s a good snapshot of the business:

As you can see, the company is primarily involved in the e-procurement and RFP aggregation businesses for the public sector. But MDF Commerce is by no means a “pure play.”  The company also has e-commerce tools for multi-channel retailers and industry marketplaces.  (The marketplaces have been around since the last internet bubble.) The marketplace segment also includes a job site for employers and job seekers in Quebec.  (Quelle Surprise!)

The company has trimmed down by selling off an EDI business (2022 to SPSC) and, I kid you not, a dating site for les Quebecois!  MDF Commerce will likely continue to become even more of a pure-play public sector e-procurement vendor.  The company also seeks to derive more revenue from agencies and less from suppliers.

(As a side note, KKR, not Accel-KKR, is acquiring MDF Commerce. The latter owns other companies like this. To add to the confusion, KKR has no relationship with Accel-KKR.)

The Deal

KKR has offered to pay C$5.80 per share for MDF Commerce, which it notes is a 58% premium to the stock’s closing price on Friday, March 8.  The total equity valuation is C$255, and since there is little debt, this amounts to about 2x expected fiscal 2024 revenue and about 20x a generously defined adjusted EBITDA. (My estimates are based on three quarters of fiscal 2024.)

This price represents a value play for KKR and a reward to MDF Commerce’s long-suffering shareholders:

The stock price is closing just a little under the offer price, suggesting no one thinks a bidding war will break out.

I would not be surprised to see more divestments under new ownership in the future, but what do I know?