UK M&A wrap

Posted by Neil Hume on Jun 17 09:38. 1 comment | Share

John Whittaker has responded to the stake-building efforts of Warren James Holdings.The billionaire property developer has been able to declare his £96m offer for film studio Pinewood Sheppterton unconditional as to acceptances on Friday morning, More…

John Whittaker has responded to the stake-building efforts of Warren James Holdings.

The billionaire property developer has been able to declare his £96m offer for film studio Pinewood Sheppterton unconditional as to acceptances on Friday morning, and repeated his intention to de-list the business (if he gets enough votes).

This morning’s statement from Whittaker’s Peel Holdings:

It is the current intention of the Board of Peel Acquisitions that if the Offer becomes or is declared unconditional in all respects and if Peel Acquisitions then holds over 75 per cent. of the issued share capital of Pinewood, Peel Acquisitions will procure the making of applications by Pinewood to the FSA for the cancellation of the listing of Pinewood Shares on the Official List and to the London Stock Exchange for the cancellation of admission to trading of Pinewood Shares on its market for listed securities. It is anticipated that such cancellation will take effect no earlier than 20 Business Days after the Offer becomes or is declared unconditional in all respects.

The question is whether he will get to 75 per cent. If he doesn’t, a stub of Pinewood equity will remain listed on the LSE.

He’s already got 63.3 per cent in the bag, so the odds are that he will prevail. that said, we still don’t know precisely how much stock Warren James has bought. All we do know is that they owned around 5 per cent before yesterday’s rumoured purchase of a further 10 per cent. And 15 per cent will be enough to prevent Whittaker from squeezing out minority shareholders.

Meanwhile, Laird, the maker of electromagnetic shields for mobile phones and laptops that has just rebuffed a 185p a share offer from a US suitor, has declared itself a Nokia-free zone.

A day after Cooper Industries went public with its bid, Laird has announced the closure of its handset antenna business.

Laird press release:

Despite the restructuring actions taken, the Handset Antenna business ran only at breakeven during the first quarter and revenues continued to decline thereafter, reflecting reduced demand from the major customer. In 2010 this customer accounted for 70% of the business’ revenues. After consideration of a number of strategic options and discussions with the major customer, the Board has decided to close the Handset Antennae business. Existing contractual order obligations will be fulfilled during 2011 and 2012 but the closure process will start immediately.

Following the closure of the Handset Antennae business, Laird’s revenues generated from what was historically its largest customer, are expected to be minimal.

For largest customer — read Nokia.

Analysts, however, are divided on the bid from Cooper. Michael Blogg of Arbuthnot Securities reckons shareholders would probably be very happy to accept an offer of around 185p a share.

Although the valuation multiples are not very demanding, even after yesterday’s rise, that can be explained by Laird’s poor track record. A manufacturing supplier of components and assemblies for various wireless and electronic applications, Laird seems to be for ever in the throes of changing fashions and requirements from its customers, needing major investment for new opportunities on the one hand and assets write-offs on the other as the group exits areas that are in decline. In our view, and in complete contrast to Chloride, this is not a particularly attractive business to be in, even if the rest of the portfolio, after exiting Handset Antennas, is currently in a growth phase. An auction must be the best hope for achieving greater value.

However, David Larkham at Arden Partners doesn’t think the offer is attractive at all. He says the antenna and mechanisms divisions have masked the performance of the rest of the group’s operations and Cooper should pay more.

The Cooper bid hardly looks compelling on a forward PE of 12.6x falling to 10.1x. After all Cooper is trading on a forward PE of 15.3x. EV/Ebitda valuation discrepancy is even larger (7.2x v 10.2x).

Our view is that the Cooper bid reflects how undervalued the group was. The upside from the ex-handset group should be capable of more sustained growth and margin generating longer term value and rating for those with medium term horizons. Management now need to demonstrate that this is the case.

At pixel time, shares in Laird were 1.8p higher at 190.7p.

Elsewhere, there’s a bit of takeover chatter around Sage. According to Computing magazine SAP and IBM are running the slide rule over the accounting software group.

However, most traders are sceptical on the basis that Sage’s sweet spot is small and mid cap companies with 50-100 employees – not the sort of thing SAP and IBM are usually bothered about. They reckon an offer from Microsoft or Intuit would make more sense and would not rule out the possibility of Sage selling its US healthcare business.

Finally, Bluetooth chip specialist CSR has revised the terms of its deeply unpopular merger with Zoran, a US imaging and video technology group.

It’s now proposing to pay $484m in cash and stock. That compares with the original transaction that was all stock and had a price tag of $679m. Whether the prospect of significantly less dilution will swing CSR shareholders behind the deal remains to be seen. But the company has at least given itself a chance, says Espirito Santo.

While we are a bit doubtful about the strategic rationale for Zoran’s merger, the revised terms should be taken positively by the market, especially as it implies 64% cash component and only 17% dilution to CSR’s shareholders. Post the completion of merger, CSR will still have a strong balance sheet with c.340m in net cash. WIth uncertainity on the merger out the way, the focus now shifts on CSR’s execution of its combo chip strategy.

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