- TDR Capital and I Squared Capital have approached the group for a possible 880p-a-share all-cash bid
- The consortium has until close of play on 5 March to table a firm offer
Portable power specialist Aggreko (AGK) has become the latest UK-listed company to attract the interest of private equity. Following a report by Sky News, the group has confirmed that it is in talks with soon-to-be Asda co-owner TDR Capital and US infrastructure investor I Squared Capital about a possible all-cash takeover offer of 880p per share.
Aggreko says the consortium has “made a series of proposals”, and the latest approach represents a 39 per cent premium to the group’s closing price on 4 February, valuing it at around £2.2bn. The consortium has until close of play on 5 March to table a firm offer, which would be adjusted for any dividend declared or paid.
News of the takeover interest came a little over a fortnight after the group announced that its pre-tax profit for 2020 would be “slightly ahead” of the top end of its previous guidance of £80m-£100m. It also reiterated expectations of a pre-tax profit of £170m-£190m in 2021, which assumes that the delayed Tokyo Olympics and Paralympics will still go ahead this year. Aggreko has a $315m (£229m) contract to supply temporary power to the Games.
The group derives around a fifth of its revenue from the oil and gas sector, which has been weakened by the aftermath of the Covid-19 pandemic, and Panmure Gordon analyst Robert Plant believes that the outlook for Aggreko could get tougher with President Biden cancelling the Keystone XL pipeline and suspending new permits for drilling on federal land. The group also generates just under a tenth of its revenue from the events market, the recovery of which remains uncertain as the pandemic drags on.
Aggreko’s shares surged by close to a third in response to the takeover talks, to 844p, but this underscores how they have underperformed in recent years, having traded above 2,500p back in 2012. Even before coronavirus struck, it seemed unlikely that Aggreko would return to its glory days and investors should consider accepting a firm takeover offer if one arises. In the meantime, we move to hold.
Last IC View: Sell, 722p, 4 Mar 2020.
