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Why the Class (ASX:CL1) share price is going nuts

The Class Ltd (ASX: CL1) share price is currently up an astounding 63% today after receiving a takeover approach from Hub24 Ltd (ASX: HUB).

Hub24 to buy Class?

Class and Hub24 have entered into a deal where Hub24 is going to buy the SMSF software business.

If the deal goes through, Hub24 will pay 1 Hub24 share for every 11 Class shares held as well as a cash amount of $0.10 per Class share.

Based on the closing price of the Hub24 share price, the total offer is a value of $3.11 per share, representing a market capitalisation of $386 million.

The offered price represents a 71.6% premium to the last closing price of Class shares on 15 October 2021.

Class’ board of directors have unanimously recommended the deal to shareholders.

Why does this deal make sense?

Hub24 said that Class is a market leader in the establishment, management and administration of wealth and SMSF solutions.

Class said the deal combining the two businesses would accelerate the transformation of Class and provide exciting opportunities for future growth. Class will continue to run as a separate business unit.

Class said that there is the opportunity to enhance the value proposition of both businesses, with product offerings for new and existing customers, as well as future revenue opportunities.

Leadership comments

Class Chair Matthew Quinn said: “The Class board of directors has carefully considered the proposal and believes it represents compelling value for Class shareholders. The structure of Hub24’s proposal provides an exciting opportunity for our shareholders to maintain exposure to Class’ growing business whilst also sharing in any future upside and combination benefits with Hub24.”

Thoughts on the deal

It’s not surprising that the Class share price has surged in response to this deal. For Class shareholders, this seems great. I’m not sure how much of a difference it will be make Hub24. Perhaps there are some benefits of getting access to Class’ client’s subscriber base and the SMSF clients.

I have written in recent months that I thought Class could be a solid investment idea and it has turned out well. Now there is an opportunity to re-invest that money into other ASX growth shares.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.

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