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Aggreko backs £2.3bn takeover by private equity

The portable power rental group is recommending shareholders accept an 880p per share all-cash offer
March 5, 2021
  • TDR Capital and I Squared Capital make firm offer of 880p per share
  • Analysts believe rival bid is unlikely

Power equipment specialist Aggreko (AGK) has struck an agreement for an 880p per share takeover by new Asda owner TDR Capital, and US infrastructure investor I Squared Capital. Valuing the group at £2.3bn, the offer is a 39 per cent premium to Aggreko’s closing price on 4 February, the day before the consortium’s interest first emerged.

The news comes just days after Aggreko revealed that it had swung to a £39m operating loss in 2020, reflecting the impact of the oil price crash and pandemic-driven cancellation of global events. Despite these pressures, the group still declared a 10p per share final dividend, which will be deducted from the takeover offer price for eligible shareholders if the deal completes after the dividend record date of 23 April. At present, the transaction is expected to be completed in the summer, subject to shareholder approval.

Aggreko’s shares have now leapt above the bid price, to around 900p, suggesting that investors are anticipating a potential bidding war. Bloomberg recently reported that rival private equity firm Platinum Equity is also mulling an offer, although people familiar with the matter said that these discussions seemed less likely to translate into a deal.

Analysts believe that a competing bid is unlikely. Panmure Gordon analyst Robert Plant sees “limited chances of a counter-offer” from either an industry peer or another buyout firm as “transitioning Aggreko from its core diesel power units to renewable power units will be costly and difficult.”

Prior to the emergence of the takeover interest, Aggreko’s shares had been struggling to return to pre-pandemic levels, and they have underperformed for a few years now – the shares were trading above 2,500p back in 2012. We think investors should accept the offer when a vote is scheduled.

Last IC View: Hold, 798p, 1 Mar 2020