AlsterResearch Update: Software AG - Early stage takeover rumours

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What’s it all about?

According to Bloomberg news, Software AG “SOW” reviews various strategic options – including a sale of the company. Whilst SOW is not commenting on these rumours, the process is at an early stage and it is unclear whether a sale will ultimately take place, according to people familiar with this matter. With a market capitalization of just under EUR 2.6bn, SOW is the second largest software company in Germany – behind giant SAP. The company currently is in its final leg of transforming its business, which has led to an underperformance vs the DAX by nearly 46% in the last 5 years. We welcome current market rumours as it supports our view that SOW’s shares are significantly undervalued, especially bearing in mind that SOW is at an inflection point of showing improving operating results. We maintain our BUY rating and PT of EUR 48.00 – an upside of 38%, purely based on fundamentals and without factoring in any potential take-over premium