You are here:

Aga offloads commercial operation

Created:
19 October 2007
Written by:
Stephen Gunnion

Shareholders of Aga Foodservice Group are in for a windfall following the kitchen equipment supplier's sale of Aga Foodservice Equipment - its commercial foodservice and bakery equipment business - to Italian group Ali SpA for £260m.

Advertising

Aga plans to return a significant portion of the available net proceeds of the proposed sale to shareholders, once £32.5m has been paid into the pension scheme and £80m has been used to pay down debt.

The sale of the commercial unit follows the failed tie-up with US-focused foodservice group Enodis last year, which would have bolstered this business. Aga chief executive William McGrath says that selling the commercial business will allow it to focus on growing the profitability of its consumer business, which supplies the upmarket Aga, Rangemaster and Marvel brands. He plans to grow the remaining business organically rather than through acquisitions. Last year the commercial foodservice business contributed £21.2m, or 44 per cent, of group operating profit, from revenue of £250m. However, some analysts believe the sale could leave the remainder of the group vulnerable to a takeover, with private equity group Duke Street Capital - its largest shareholder with 17 per cent - a likely suitor. Management might also be keen to take the group private.

ARBUTHNOT SECURITIES

Neutral. I think it's a fair price and don't think they could have expected more than that. Strategically, I don't know why they need to sell Aga Foodserve Equipment as the group in its entirety is a more interesting investment than the consumer side itself. It also becomes more of a takeover target itself now. Previous expectations were for full-year EPS of 32.5p, rising to 35.4p in 2008. However, this is likely to be cut if the deal goes through. Our new target price is 420p, down from 480p.

ARDEN PARTNERS

Neutral. The price is probably at the lower end of the range we thought they would get. We expected a range of £270m-£300m. Clearly the market has changed over the past few months so the fact that it is below that range is probably not surprising. We have downgraded our rating to neutral on Aga Foodservice as the share price has had a reasonable run and it's probably better to travel than to arrive.

IC View

FairlyPriced

While the sale of Aga's commercial business will be earnings dilutive, this will be mitigated by the intended return of about £150m in cash to shareholders. At 439p, the shares look fairly priced for now.

Last IC View: Good value, 415p, 10 Sep 2007

  • Back to top

Products and Services from Barclays Stockbrokers.

The UK’s No.1 Stockbroker

Stocks and Shares

Contracts for Difference

Financial Spread Trading

Gilts and Bonds

Funds Market

FX

Education Centre

Trading Simulator

Advertorial Feature

Take control of your investing with CFDs

Have you ever watched a move in the markets that you saw coming, but you weren't able to exploit?

by Dominic Picarda

Advertorial Feature

Spread your risks with spread trading

With so many big moves in the world's financial markets, there have seldom been more opportunities around for spread traders. Isn't it time you joined them?

by Dominic Picarda