Roper Technologies Inc (ROP) is in talks to acquire private equity-owned insurance software vendor Vertafore Inc for close to $5.5 billion, according to a report from Reuters.
Citing people familiar with the matter, the report notes that the deal would be Roper’s largest acquisition to date- and indicates that the US software company is keen to continue its expansion plans despite the coronavirus pandemic.
Roper is competing against private equity firms in an auction for Vertafore, the Reuters sources revealed, adding that an agreement could be reached within the month.
Vertafore, a software vendor to the property and casualty insurance industry, was snapped up by Vista Equity Partners and Bain Capital in 2016 from private equity firm TPG for $2.7 billion, including debt.
Meanwhile Roper operates businesses that design and develop software and engineered products and solutions for a variety of niche end-markets, including healthcare, transportation, commercial construction, food, energy, water and education.
Shares in Roper have surged 25% year-to-date, and the stock scores a cautiously optimistic Moderate Buy consensus from the Street. That’s with an average analyst price target of $450, indicating upside potential of just 2%.
Oppenheimer analyst Christopher Glynn reiterated his hold rating on ROP without a price target following the release of its second quarter earning results.
“Our Perform rating reflects a pause (from previous long-held Outperform rating) as FCF yield has fallen to ~3.2%, but noting capital allocation driven cash-compounding outlook remains vibrant, and as we review appropriate comps for FCF yield” the analyst explains.
He believes that Roper remains an attractive long-term opportunity with consistent organic growth from a high-quality portfolio of businesses, but argues that this is already reflected in valuation. “ROP’s strong positions in key niche markets support best-in-class incremental margins” he adds. (See Roper stock analysis on TipRanks)
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