Last week, mining software company RPM Global (ASX: RUL) reported its strong FY 2025 results, prompting the share price to gain more than 20% to around $3.80. A conference call to discuss the results was scheduled for this morning. However, prior to the conference call, the company today announced that it had received a non-binding indicative proposal from Caterpillar to acquire all the shares for $5.00 cash per share. This in turn saw the share price gain another 20% or so, to close at $4.65 this afternoon.
Now given that the proposed takeover is now the biggest influence on the share price, it would be premature to dive into a full analysis of the FY 2025 results. The company reported: “as of 1 July 2025, the total value of software ARR was $69.1 million, comprising $62.8 million from subscriptions and $6.3 million from maintenance.”
By my calculations, the subscription revenue ARR grew at over 25% throughout the year. To me, this was a positive part of the result. Part of that growth is from winning customers, and part is from converting existing customers from license agreements to subscription agreements.
The overall ARR growth has continued into FY 2026, with today’s acquisition proposal announcement noting that:
“The Indicative Proposal of $5.00 cash per share values RPM at approximately $1,123 million in equity value (on a fully diluted basis), which implies an Enterprise Valuation (EV) of $1,048 million and represents… 14.6x Software Annual Recurring Revenue of $71.8 million.”
The earnings conference call this morning was very different and much shorter than any other call I’ve heard from the company. The CEO Richard Matthews focussed on the takeover offer and disclosed that the company had made more than two dozen confidentiality agreements with potentially interested party. Therefore, there is at least some possibility of a competing bid.
That said, the offer price of 14.6x ARR seems fairly generous, so I don’t think the probability of a bidding war for the stock is particularly high. Offsetting that, there is of course a risk that Caterpillar will find something during due diligence over the next six weeks that might cause it to withdraw its bid. Until the deal is signed, RPM Global shareholders cannot be overly confident it will succeed.
On the other hand, the CEO did seem confident on the call, and the way he focused entirely on the takeover proposal makes me think he is dedicated to executing the deal and confident he can pull it off. His track record is of deft dealmaking and I think it’s far more likely than not he will succeed, though of course nothing is guaranteed.
Probabilistically, I think the most likely outcome is the shares get acquired for $5, in which case there is a 7.5% upside to the current price of $4.65.
Certainly, there is some possibility that the offer might be withdrawn. In that case, I would say the share price would drop to at least the price it was prior to the offer. To be a little conservative we could assume it might drop a little further to $3.60. That would be a downside of 22% in the short term, but would still hold the possibility of a share price recovery if the company continues to perform well.
To my mind, there is an approximately similar chance of a higher offer, as there is that the current proposal is withdrawn. At a glance, the 14.6x ARR price for RPM Global is not cheap, but it currently seems like a reasonable price for a takeover, given the concept of a control premium and keeping in mind the strategic value to Caterpillar.
Of coure anyone can cherry pick either a wildly high acquisition price or a wildly low acquisition price to compare. Instead, I’d argue this offer price is reasonable. By way of comparison I will proffer Duck Creek. Like RPM Global, it offers a software platform for a global industry that is in the process of automating processes and using software to guide operational decision making.
But whereas RPM Global targets the mining industry, Duck Creek provides technology solutions for the insurance industry. Duck Creek reported its latest SaaS ARR figure of US$180.6m, in January 2023, up 24%, and announced it had received a US$2.6b takeover offer a few days later. This amounts to a multiple of about 14.4x SaaS ARR, in January 2023, when prices for software stocks across the board were significantly lower than they are now.
Now, the correct multiple to compare with Duck Creek’s SaaS Arr is RPM Global’s subscription ARR of $62.8m. This figure was up a similar amount over the preceding year (around 25%) as was Duck Creek’s. We can estimate RPM Global’s subscription ARR is now around $65m so the offer price represents around 16x subscription ARR, about 11% higher than the multiple paid for a similar company near the bottom of the market for tech stocks in 2023.
Therefore, even though I would not buy RPM Global shares at this multiple, I do not think it is a particularly outstanding price for a takeover of the company. After all, for a takeover to occur, it must offer some kind of control premium, so you would expect some optimism in the offer price.
Given that I currently think the takeover price is fairly reasonable and acceptable but not overly optimistic, and given the company implied it had quite a few interested parties, and given market conditions remain buoyant at this moment, I therefore do not want to rush to issue a sell recommendation. That said, and as history shows, I am certainly not opposed to selling in these situations.
The calculus of whether to sell or hold the stock also takes into account the potential alternate uses for the capital, and those potential uses are always changing. Depending upon when the stock was purchased, there are also sometimes tax considerations impacting when and whether to sell a stock.
For now, and acknowledging the fact that the share price sits only about 7% below the most likely final price, I downgrade RPM Global from Buy to Hold.
RPM Global is therefore now a Hold recommendation.
Review the original RUL recommendation here.
Disclosure: The author of this article owns shares in RUL and will not trade them for at least 2 days following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
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