Agreed @UncleWally I think that is the general consensus here - nice to get the bump but would have been great to see the thesis play out a little longer. Interesting the stock is trading below the bid this morning, I guess a discount for the fact that the bid might not happen, but given what appears to have been a well designed process, I think that it's unlikely it wont' proceed, particularly given Caterpillar has the board's endorsement. I had a longer think about the ATO ruling over the weekend as well - given it was going to be a tax-free capital return and that reduces the cost base, given this bid, it doesn't actually matter whether they proceed with this ruling now anyway (given the gain will all be in this financial year anyway, assuming the scheme is consummated this financial year...)

Richard said, "When you look at the two companies' software products and put them tightly together you will get something special." (or words to that effect).

He's right there. This will be a significant step forward in mine automation, planning and long-term and short-term optimisation.

$5.00 - right at the low end of my estimate. (You can't blame me, as it's being taken off me!)

If the Caterpillar acquisition of RPMGlobal goes ahead, I would consider selling my shares due to ethical concerns surrounding Caterpillar Inc

Correct me if I’m wrong but you won’t have a choice? Caterpillar will give you your 5 bucks a share and it will no longer be your problem?

Yes, you’re right—I’d receive the $5 per share premium if it goes through. I just meant that, while it’s a profit paid by Caterpillar, my conscience still feels uneasy about it. It’s just my comment only

@GazD you are correct.

We will have a Binding outcome on all shareholders if the Scheme of Arrangemet is approved by (a) 75% in value of shares voted and (b) a majority in number of shareholders voting.

Given the healthly premium to a record SP, I expect shareholders will support the deal.

Judging by what we were told on the call, $RUL had Moelis run a process to give the Board confidence that $5.00 from CAT is the best deal for shareholders. So provided acceptable terms are agreed, and there are no material adjustments sought by $CAT as part of their due diligence, it seems likely that this deal will happen as announced.

According to my BA, Caterpillar have done 38 overall acquisitions, with only 3 in the last 5 years, That's not a lot for such a large and diverse company, indicating their focus on organic growth.

Apparently, there was only one deal (announced in 2013) with a dispute that led to a negotiated price reduction, but this deal completed anyway.

Richard said that Caterpiller and $RUL know each other well, and often work together on the same customer projects. Hence Caterpiller will have a well informed and granular understanding of the value potential of integration between their software products.

Of the long list of potential acquirers I wrote up last week, I believe there is probably no better two companies in tems of strategic fit. So the process run by $RUL pushed Caterpiller to a price they were willing to play to knock out the competition.

So, I doubt that there will be a bidding war.

Assuming that $RUL has been well managed and prepared for sale (i.e., quality of documentation around its software development, maintenance and operational controls; and given Richard's track record which we have discussed here before over the years ), which I believe it has been, because of the demands of its blue chip mining clients, I put the likelihood of this dealing completing at $5.00 at 90%+.

While I will be disappointed to lose $RUL from my portfolio, and although I haven't updated my valuation since a year ago, if I escalate the upper bound of my last valuation of $3.60 by 20% for the passage of time, then the $5.00 offer exceeds the $4.32 upper limit of valuation range by a decent margin of 16%,

So I will be voting for the Scheme when the Board puts it forward, if they support it, which I am sure they will.

Agreed @mikebrisy. It looks like a full price, and a good strategic fit.

So for all ordinary holders, what is the best course of action for now? Do we sell any or all of our position, or sit on it given it is likely to go through (and of course, leave the door open for the small possibility of an improved offer or competing bids) ?

I will also be sorry to see another software stalwart being taken off our boards. A huge hole in my portfolio to fill, and I have barely gotten over $ALU from last year!

@mikebrisy - given it is currently trading at ~$4.60, it seems the market agrees with you on your probability (maybe it is a little less optimistic than yourself that it goes through)

I'm a little surprised - I was expecting it to trade closer to the $5 mark, given the potential for a bidding war - but it seems the market agree with your assessment that this is probably the best offer it will get

@thunderhead let's say it take 6 months to close, and for this reponse let's assume 1) the deal closes and 2) there is no better bid.

So, I value the risk free pile of cash at 4.25% pa and an opportunity cost equity return of 10% pa. Meaning, I should accept between $4.75 and $4.90, today, depending on what I do with the proceeds.

With the SP at $4.655 at time of writing, I am holding everything, as that is too steep a discount.

Worst case, the deal falls over, and SP drops back to $3.77 (although I think there would be an enhanced M&A premium on it, so let's say $4.00).

I'll consider selling 50% of my position if the SP get up above $4.80 and probably everything if it goes over $4.90.

I followed a similar approach with $ALU, and I got very close to the final price months ahead of the deal concluding.

Thank you for your typically well laid out response @mikebrisy.

I concur, and am not doing anything for the time being.

Yes, I also followed a similar kind of strategy for ALU. Left a bit of money on the table with the initial sale, but I also had the extra motive of splitting the tax liability across two FYs (which won't be a consideration here).

While the end result would be the same @GazD - meaning that Caterpillar end up with @rija's shares in the end, there's still the choice to sell on-market before the deal settles, and there is usually a few months between when a deal is announced, agreed upon by the target company's Board, the shareholder vote, then the final trading day of the target company's shares. From an ethical standpoint the end result would be the same, however from a personal viewpoint, it would not be @rija accepting cash from Caterpillar but instead from someone else, even though those shares would eventually end up in the hands of Caterpillar, all assuming the deal goes through, so I can understand that POV from @rija.

BTW @rija what are your ethical concerns around Caterpillar, if you don't mind me asking? I do apply a lot of filters to sectors myself (no gambling companies, no weapons companies, no drone companies (because drones can be too easily weaponised), no tobacco companies, although I can't extend that list to alcohol companies since I do like the odd drop myself) so I am personally genuinely interested, not trying to start an argument here.

https://www.business-humanrights.org/en/latest-news/caterpillar-response-re-alleged-complicity-in-human-rights-abuses-in-israel-the-occupied-territories/

Understood @rija - thanks for the link.

MF moved RUL to a sell on their scorecard

The SP closed at $4.63 which is an 8% discount to the takeover offer. It could still be a good investment for new money assuming a 90% chance of it going through. An easy 8% within 3 to 6 months. If we buy more, then the take over becomes good news rather than bad. The downside if it falls through is a drop to $4, so 14% loss, and even then, the prospect of making much more over the next 5 to 10 years. Seems like an asymetrical bet. Am I missing something?

@actionman I think that sums it up nicely.

The EMV as you’ve stated it at 3-6 months is:

= 90% x $5.00 + 10% x $4.00 = $4.90

So the expected return is ($4.90 / $4.63 - 1) x100% =5.83% in, say, 6 months.

Which is a rate of return of 12%.

You just have to accept the low probability downside “tail”.

I imagine we’ll see some buyers in the morning pursuing that thesis! The problem they will face is liquidity. For example, at the moment there are no sellers at $4.63, $4.64 and $4.65. And there is only 24k volume at $4.66.

I guess the downside is (1) the deal falls through - I haven't looked at it but I assume they need FIRB approval and a positive RUL shareholder vote - and for Caterpillar not to walk away for any other reason, and (2) the time value of money, as in what other places can people put their money where they see less downside risk. If the deal is 90% likely to go through, sounds like an arbitrage opp, but what happens to the RUL share price if that 1 in 10 chance thing happens and Caterpillar do walk away? I assume it's going to take a few months to all go through if it all goes to plan?

Given the valuation implied in the takeover price, if the deal falls through for any reason, and assuming no other company-specific risks play out after that, it will take atleast a couple of years to "grow into" its valuation if the price is knocked back towards the mid 3s.

So I think it is prudent to take atleast a reasonable portion off the table as close to $5 as possible, as this offer has brought a fair bit of the return over the visible forecasting period forward.

@Bear77 I think it is prudent to allow for 6 months for the deal to go through.

Here’s why I’ve assumed a 90% COS (fully accepting other values are also plausible, because it’s an abstract concept that we can never know what it is or was!)

• $RUL ran a process providing a data room for all parties interested, so Caterpillar have not lobbed in a NBIO “out of the blue”
• The two businesses have a history of working together on shared clients, and so are relatively well-informed
• Management/Board appear (to me) to be motivated to sell and appear to think $5.00 is fair and the best price they’ll get; Richard said he believes customers will be the big winners from this deal!
• I think investors will support the deal
• FIRB will not be an issue (US acquirer; no national security or sovereign capability issues)
• Caterpillar has a track record of following through on deals they initiate - they don’t lob in NBIOs and walk away
• There is a compelling industrial logic for this deal
• $RUL must have well-developed business controls because the contracts and Master agreements they have with some of the top tier miners have quite onerous hurdles to jump over to win the deal. This makes me think it unlikely that Caterpillar will find something in due diligence that scares them off, or reopens the price. (But this is a risk, and I’m not well-placed to assess it.)

@thunderhead makes the good point that if the deal fails, then we are probably looking at a couple of years of lost returns compared with selling today at $4.40 - $4.60.

I’m holding out for a bit more, because I accept the downside risk, and I “expect” to make an attractive 6 month return.

Investors can make different rational decisions, as there are quite a few variables that are hard/impossible to evaluate objectively

• Each investor’s assessment of CoS deal completes
• Probability of a superior offer (which I assess at near zero, rightly or wrongly)
• Value of the business
• Investor’s risk appetite
• Investor’s view of their opportunity cost

So, then, would I buy more?

Quite possibly, for example, if I could pick up more at $4.40 (let’s assume some “bird in the hand worth more than two in the bush investors” sell out today, and liquidity drags SP lower), then my ROI according to assumptions laid out previously becomes 24%. Even today, $RUL is only 7.5% of my RL portfolio, so it is not breaking any concentration risk “rules” yet. I could happily add another 2.5%, and I have cash to do this.

Off for my morning run now,… will mull over putting a “price limit” order in before the open, as there is not much sitting in the “buy” queue at the moment. I expect things will change.

@mikebrisy Thought you might be interested in Gaurav Sodhi's take on RUL as he doesn't think Caterpillar is the natural owner of RUL.

Caterpillar probably wants RUL's Mining Asset Management software (AMT) to be rolled up with the heavy equipment it sells but much of RUL's cost base would still need to be maintained by Caterpillar.

In Gaurav's words "A dedicated software business could integrate RPM's modules into its own management and sales channels and strip out more costs. It's quite possible another bidder joins the fray"



@OxyBBear thanks for sharing Gaurav's perspective. He has followed $RUL for many years, and has been a $RUL bull for years (I don't know what II"s current recommendation on $RUL was,) I certainly respect his opinion.

However, I don't completely agree with him. Yes, AMT is the key product, but let's just talk through some of the other products in the slide below. I believe that Caterpillar's interests today are already getting into some of the functionality of "Simulation", "Operation", "Scheduling" and "Execution" products. This is because the parameters used to tune Caterpiller software that guide some of the funtionality of the autonomous plant both feed into and can be optimised by various functions in the different $RUL products.

I believe that in the integration of the two businesses, they will line up each company's software products/functionality and identify different integration approaches for each. Depending of the outcome of that analysis, I reckon it will make sense to have an integrated software development and support team, albeit it with sub-teams specialising in each product, led by a Product Manager.

One question is whether within the new Caterpillar "Resources Industries Software" group, there will be an ongoing sub-team called something like "Mine Planning and Optimisation" that has as its primary focus not automation of yellow plant, but overall mine value optimisation. I think there will be. To back up my view, go and have a look at the Caterpillar Youtube Channel and pick out some of the videos on mine automation and "mine of the future". Several of these explicitly refer to the role of Caterpillar solutions in optimising capex, opex and maximising safety for clients. The $RUL product suite will enhance their ability to do that.

I think there is an open question as to whether Caterpillar use the acquisition to move beyond the "yellow plant" and more into the mine management realm. This is a capability that $RUL brings to the table. If I was the CEO of Caterpillar, I would look to retain this capability, because I believe it can lead to improvements in design of the "yellow plant', particularly in a "mine of the future". My point is, this is all becoming integrated from the Life of Mine Plan, down to the shovel at the mine face.

Gaurav's view does raise an interesting question: will this more strategic, enterprise capability thrive within Caterpiller? (Or, in other words, can Caterpiller become a natural owner of it, if it isn't today?) For that,I'd need a better understanding of the strategy of and culture within Caterpiller, which I don't have. That's said, the Caterpiller people I have met, seem pretty plugged into the bigger picture vision of the Mine of the Future, and the key role of data into the future.

Gaurav is also correct in that a dedicated software company could get more cost synergy from the acquisition.

Of all the global software companies, my favoured one for a competing bid is the Swedish listed company Hexagon AG (Market Cap EUR25bn). This was not on my original list last week when we were speculating who might be on the list of companies involved in the process. Mining is only 5% of their EUR5.5bn annnual revenues, ... that's EUR275m sales to mining clients, which puts $RUL's scale into context. RUL might strengthen their presence in what is for them a relatively minor sector if it has products that they see fitting within its offering to mining customers.

However, while Hexagon could easily afford $RUL as a "tuck-in", Caterpillar is a US$232bn market cap giant. And I don't really think that squeezing every last $ cost synery out of a $1.2bn $RUL acquisition will be that important for them. Obviously, they'll take out the corporate overheads (Board, Finance, HR, Legal, Procurement, Comms & IR etc.) but with $RUL now cleaned up as a pure SaaS company, they will want to keep all the good tech and sales staff, even if over time many of these might go on to work in other Caterpillar divisions. I just don't see this about cost synergies from Caterpiller's perspective.

If there was to be an alternatave offer, I'm also guessing it would need to be something north of $5.50, for the Board to switch horses and offer that business full access and abandon the Caterpillar offer. And that would just add more "blue sky" that the acquirer has to see in the deal. There isn't the cost base in $RUL to justify the premium on the basis of cost synergies.

So overall, on balance, I don't think a competing bid will emerge, and I think Caterpillar has gone into this with serious, long-term strategic intent, and paid up to secure it.

Don't get me wrong, I'd LOVE there to be a bidding war!

I’m all for a bidding war, though I would be pleasantly surprised if it happens. I am getting my bag of popcorn ready.

Just in from Taylor Collinson ... I did not know this!

Taylor Collinson Research Note

"We cannot be certain, but consider it unlikely CAT would find reason for not submitting a BSID post due diligence. We suspect that anything materially significant would already have come to light. Management’s 1st September investor call confirmed 25 confidentiality agreements had been signed, allowing parties access to the “data room”. It was also confirmed multiple NBIO’s were received, though not by who or how many. Significantly, the flagship AMT product, which presently makes up ~37% of RUL’s ARR, was originally created as a solution for CAT to manage maintenance contracts in 2002. With AMT still used today in both CAT and competing fleets globally, CAT’s understanding of the offering is likely well established." 

@thunderhead I'll see your bag of popcorn, and raise you two.

Sorry @mikebrisy , didn't see your post from Collinson also!

I do wonder what their definition of outperform is when the offer is already on the table.

@nessy no worries. I unwittingly do it all the time.

Many analysts include definitions of their ratings, but I didn't see on on this report.

"Outperform" usually means that the analyst has a price target, commonly over 12 months, which if achieved will mean the business delivers a superior return from the current share price when compared either with the market or a stated benchmark.

So, in this case, at $4.65 on the date of the reports and a $5.00 "Target Price" delivered in 6 months (not sure when they assume, as I have only scanned their report), the expect return rate is 7.5% over 6 months, which is 15.6%, which certainly exceeds the expected market return by a fair margin - hence Outperform

Of course, in this calculation, I've assumed 100% CoS in the deal closing at $5.00, and it is not clear how or whether the recommendation considers the potential of the deal failing through or the likelihood and value of any potential alternative deal.

Ditto!

Just checked - now me too (just) :)

I love the 96.3% gross margins and 94% retention rate along with the fact they are ambitiously aiming for the rule of 40.

Management expects FY26 revenue of $88-92m ( 17% growth) and underlying earnings (EBITDA) of $23-25m, underpinned by cost savings of $8.2m and rising ARR. 

In fact, as things stand, it has overtaken $EOL by a hair to become my second largest holding, and $EOL itself reached that mark only last week :)

Well, that was a sigh of relief!

Given I have had AD8, AVH and EGL all disappoint me recently - in a bull market no less - it's nice to know I got something right!

Looks like RULhas requested a trading halt with the reason being the receipt of a possible takeover.

Request for Trading Halt – ASX Listing Rule 17.1 RPMGlobal Holdings Limited ACN 010 672 321 (ASX: RUL) [RPM ® and “Company”) requests an immediate trading halt in its securities pursuant to ASX Listing Rule 17.1.

The Company is awaiting signature of an agreement related to an indicative proposal from a third party regarding a potential acquisition of the Company.

In accordance with Listing Rule 17.1, the Company advises:

• The trading halt is necessary to ensure the Company complies with its continuous disclosure obligations.

• The Company requests the trading halt remain in place until the earlier of commencement of trading on Tuesday 2 September 2025, or the release of an announcement regarding the agreement.

• The Company is not aware of any reason why the trading halt should not be granted.

• The Company is not aware of any further information necessary to inform the market about the trading halt.

Held ( and was hoping to hold for a long time).

@OxyBBear I don't mind if the result adds bit of speculative M&A premium to the SP, but I hope $RUL doesn't get taken out. It is one of the best, long term ideas in my portfolio.

That said, everything makes sense at a price, so I hope the Board holds out for a good one when it gets to that point.

Also, I wonder if there was some leaking to explain the SP earlier this week, because I didn't see it in the result/guidance, and I put it down to a pure SaaS re-rate at the time.

@mikebrisy Like you I was hoping to hold this for a long time as I believe RUL is only just getting started after all of the one off restructuring costs associated with the sale of the Advisory Services business. If RUL had the opportunity of producing clean results and then was taken over 5-10 years down the track then I wouldn't mind so much.

As for the share price leak, imo there wasn't any leak. The results pretty much beat market expectations handily and I put the share price surge down to short term traders buying on the back of the results and share price momentum.

@OxyBBear at what price would you be HAPPY for the board to let it go? $5.50? $6.00? $6.50?

@mikebrisy +$7.50 considering my long time frame but I don't exspect the offer to be that high. The other issue for me is that I don't need any more cash. I had quite a large holding in ALU when it was taken over and I had the fortunate problem of trying to redeploy the funds but still a problem nevertheless.

@mushroompanda makes senses. They’ve invested hugely over a long period in mine automation. Extending into the various software systems for mine planning and execution makes perfect sense. And they already have phenomenal software development capabilities.

(I used to have someone from $CAT come along to my MBA classes and give a guest lecture on mine automation. So I have had some first hand insights here.)

A bit more from AFR Street Talk.

ASX-listed mining software technology provider RPMGlobal is squarely in the sights of heavy equipment manufacturer Caterpillar.

Caterpillar is a NYSE-listed construction, mining and engineering equipment manufacturer. Bloomberg

Street Talk understands Caterpillar has lobbed a bid for $832 million market cap RPMGlobal, causing the latter to enter a trading halt on Friday morning regarding “an indicative proposal from a third party regarding a potential acquisition”. RPMGlobal is waiting for a “signature of agreement” with that party.

Investment bank MA Moelis Australia and Baker McKenzie are advising RPMGlobal.

It’s understood Caterpillar isn’t the only party to have put in a bid, with around four other bidders in the process around the $5 per share mark. This represents a significant premium to the 52-week low of $2.40 per share.

RPMGlobal is the last mining software company left standing after its peer, mining software business Micromine, was sold to the Weir Group for $1.3 billion. Other ASX-listed enterprise software solutions have also been on the receiving end of takeover offers – Ansarada, which provides data rooms for M&A, and Aconex.

Shares in RPMGlobal have gained 26 per cent this year and last traded at $3.77.

"... with four other bidders in the process around the $5 per share mark."

If there are a total of 5 serious bidders, then you can bet they'll have to do a LOT better than that.

If there is only one interested party, you might see a low premium of 10-30%, but with 5, that increases the chances of a 50%+ premium.

And who ever heard of the reference price being the 12m low point? The starting point is the closing price of the two trading days since FY25 results came out. So that's 0.5 x ($3.88 + $3.77) = $3,83,

So, with multiple parties, you have to believe a 30% - 50% premium to that is achievable. i.e., $5.00 - $5.75. At least.

With Caterpillar reportedly making this move, a lot of firms will see the potential advantage it gives them for fully integrated mine automation solutions. The list of players who would not want to be disadvantaged by Caterpillar stealing a march includes:

• Komatsu
• Sandvik
• Eporic
• FLSmidth
• ABB
• Siemens
• And even Accenture, Oracl eand SAP ... although these are less likely, I think.

There are real giants here. So, here's hoping for a fierce battle, and an $RUL board that will hold out for a good deal.

I've had the beenfit of visiting one of Australia's remote operations mine control centres. The tech is mind-blowing. And there is software and data everywhere, with teams of people looking at how to optimise performance. Integrating real time planning and performance management into daily, weekly, annual and life of mine plans is the next step.

Caterpillar really are a "natural owner" of $RUL, but I can't underscore enough the advantage fully integrated solutions will give them. This potential deal will make everyone in the industry sit up and take notice.

Well done holders. This company has remained a classic 'kick myself I don't own' company and will continue to be so.

I would be torn re: their sale as a holder. Lots of room to grow and blue sky ahead. But as you note @mikebrisy, we may see a serious bidding war to acquire.

Hope the board represent holders well.

They are in the process of applying for a ruling from the ATO regarding the payout from the funds from the sale of the services division earlier this year - hopefully that can be preserved by the incoming bidder as well…be interesting to watch if a bidder war develops from here…I will be a little bit disappointed to not get a chance to stay in as I think the company has a bright future

held IRL and SM

This will be another huge hole for me, hot on the heels of ALU last year.

However, it is not a surprise given who is leading the company. This is straight out of his corporate playbook.

@mikebrisy

Can't see Oracle or SAP being interested to be honest. I believe they are more concentrated towards the enterprise end than something like engineering especially mining operations so there would be less synergies.

@edgescape I agree with you. Adding them to the list as “less likely” was a bit of an afterthought. That said both SAP and Oracle have been building out mining-specific offerings including via partnerships, although not acquisition, as far as I can tell.

While both are solidly grounded in enterprise, as you say, they do have offerings in planning, forecasting, logistics and supply chain, including specifically for mining. If the equipment OEMs start leveraging their longstanding automation and digitalisation thrust into mine-wide operational and strategic planning and optimisation (which is where $RUL sits), then it does start to encroach on functionality the ERP provider sees as a potential adjacencies or add ons to their mining modules.

However, you are right in that a c.$1bn acquisition seems highly unlikely. But they will be taking notice.

In a similar way, system integrators ( like Accenture) will more likely be seeing an opportunity for how they can partner with the new (potential) OEM owner of $RUL, to help roll out across the OEMs bigger client base. That’s because the opportunity set will likely exceed what the $RUL people have the capacity to support.