Solera Holdings Inc (NYSE:SLH) may be in talks for a possible buyout, according to Bloomberg citing people familiar with the matter. The news of a potential sale of the firm marked a volatile Wednesday for the stock, while on Thursday it opened higher and then retracted, currently trading flat. According to Bloomberg’s sources, the automotive claims processing services and software firm is consulting with a financial adviser to measure just how much buyers may be attracted to buying the firm. The report specifically names Pamplona Capital Management and Thoma Bravo LLC as buyout firms which have been approached by Solera, a firm that has a market capitalization of about $3.26 billion.
It should be taken into account, however, that Solera Holdings Inc (NYSE:SLH)’s plan is in an early stage with a high possibility of no deal being made. Nonetheless, it should also be pointed out that a separate report from Reuters, citing a source familiar with the matter, reveals that at least one of the private equity firms Solera has supposedly approached “has arranged financing for the acquisition,” which may point to the buyout talks being further along than what was initially reported by Bloomberg. The possible acquisition of Solera is also framed by multiple acquisitions of the firm itself. Just since June the company has announced the completion of three deals: it bought DMEautomotive, LLC on June 4, Identifix on July 17 and Autodata B.V. on August 4. Identifix is the firm’s largest acquisition since 2014, with the deal valued at $595 million.
The prospect of a deal also increased the popularity of Solera Holdings Inc (NYSE:SLH) during the second quarter. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 123.1% and beating the market by more than 66.5 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
As mentioned earlier, hedge funds were bullish on Solera Holdings during the second quarter, as the number of funds with long positions increased to 20 from 15, while the aggregate value of their holdings went up to $289.97 million from $259.69 million at the end of March.
Moreover, at the end of June, Jeffrey Tannenbaum’s Fir Tree held the largest stake in Solera Holdings Inc (NYSE:SLH) among the hedge funds Insider Monkey tracks. Fir Tree initiated a stake of 2.13 million shares during the second quarter. Millennium Management, led by Israel Englander, also increased its stake in Solera to 290,077 shares held at the end of the second quarter. On the opposing side of the spectrum, we have Ken Griffin’s Citadel Investment Group, which cut its stake in the company by 345,200 shares, to 1.68 million shares. Nonetheless, Citadel remained the second-largest shareholder in our database, trailing Fir Tree. Steve Cohen’s Point72 Asset Management also dumped all of its 70,300 shares in Solera during the same period.
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