- Founders wish to sell combined 53 per cent stake
- The board has initiated a formal sales process
Precision instruments maker Renishaw (RSW) has initiated a formal sales process after its founders announced that they wish to sell their majority stake in the company.
Having started the business together back in 1973, executive chairman Sir David McMurtry and non-executive deputy chairman John Deer own a combined 53 per cent of Renishaw’s shares, which are currently worth around £2.7bn. They said that “[n]ow finding ourselves in our eighties, our thoughts have increasingly turned to considering the future of our shareholdings…and securing the future of the business.”
The board has decided that it would be appropriate to investigate the sale of the company, but it will not be handing the business over to just anybody. Renishaw says that it is seeking a buyer “who will respect the unique heritage and culture of the business, its commitment to the local communities in which its operations are based, and who will enable the company to continue to prosper in the long term.”
That statement is perhaps a warning shot to prospective private equity players who have been on a shopping spree in the UK, taking advantage of the ‘double discount’ on valuations from Covid-19 and a depressed pound.
But they would be hard-pressed to pick up Renishaw at a steal. News of the potential sale sent the shares surging by a close to fifth, to an all-time high of 6,900p. They have now more than tripled in value from their mid-March ‘Corona crunch’ low last year.
Renishaw’s earnings have also bounced back strongly during the pandemic, with sales growth in the Asia Pacific and cost cutting boosting adjusted operating profit to £41m in the six months to 31 December, up from £17m a year earlier. Sitting on £162m of net cash, it also reinstated its dividend last month.
Despite its cyclical vulnerability, the group has been a long-term performer for investors, with its problem-solving products and structural growth drivers making it a high quality industrial play. As we await the outcome of the formal sales process, hold.
Last IC View: Hold, 4,746p, 13 Aug 2020
