Alpha Group’s Potential Takeover Valuation Explained (ALPH) (CPAY)
Growth with and without acquisition
Alpha Group has been one of my favourite holdings for the past couple of years. It now ranks among the largest positions in the Buried Bargains portfolio, and since we initiated the stake in January the position is up 36 percent, translating into an attractive return on invested capital.
I am writing today because Corpay has publicly expressed interest in acquiring Alpha. Although no formal offer has been tabled, the announcement makes this an ideal moment to revisit the investment thesis. I will begin by estimating the price Corpay might be willing to pay, re‑valuing Alpha Group on the basis of the most recent information. We estimate that Alpha Group is still largely undervalued and that any offer under a 50% premium will probably face the rejection on the board, however we could profit from this event (see the end of the article).
Alpha’s revenue comes from two sources: its core operating activities and the interest income it earns on client balances. The share price has suffered because the market assumed interest rates would quickly fall back to the one‑to‑two‑percent range. That has not happened, and current rates now appear likely to persist for quite some time. In the meantime, interest income has enabled Alpha to accumulate a formidable net‑cash position of 217.5 million pounds, a sum that represents almost a fifth of the company’s market capitalisation.
For readers new to the story, Alpha Group provides foreign‑exchange risk‑management solutions, offers simplified multicurrency accounts and payments, and, more recently, supplies debt‑sourcing and structuring advice. Put simply, the company helps clients hedge currency exposure and gives investors, funds, and individuals access to multicurrency accounts in key jurisdictions.
Since its 2016 IPO Alpha has grown from a thirty‑person team generating six million pounds a year to a business that closed the 2024 financial year with 135.6 million pounds in revenue excluding interest and 220.9 million pounds including it. Net profit margins exceed fifty percent, and management has produced outstanding returns on capital employed over the past decade. Remarkably, the shares still change hands at just thirteen times earnings.
My latest update on the company follows below and includes a link to the full thesis.
Corpay acquisition interest.
Corpay, Inc. (NYSE: CPAY), a global S&P 500 corporate‑payments company, has been aggressively widening its portfolio and market reach through acquisitions in recent years. On Friday it confirmed that it is in discussions with Alpha Group’s management about a potential takeover. Corpay trades at roughly twenty‑three times earnings and, on consensus estimates, should compound at a pace similar to my forecast for Alpha, including the benefit of Alpha’s interest income. At Alpha’s present valuation the deal would be immediately accretive for Corpay even if it pays a substantial premium. The company’s appetite for acquisitions is well established: it recently bought GPS Capital Markets, an FX provider, for an undisclosed sum and has stated that its corporate‑payments division is on track to surpass 1.5 billion dollars of revenue by 2025. Adding Alpha would be highly complementary and would further accelerate growth in that business line.
Revaluing Alpha (Full Valuation, Price Target, and Deal Analysis Available to Paid Subscribers)