14th Jun 2016 10:32
LONDON (Alliance News) - Shares in Premier Farnell PLC leapt Tuesday after it agreed to a takeover offer from Swiss manufacturing company Datwyler Holding AG, in an all-cash deal that values the London-listed company at GBP615 million.
Datwyler has agreed to buy the technology products distributor for 165 pence in cash per share, which is about 51% higher than Premier Farnell's closing share price of 109.3 pence on Monday. Shares in Premier Farnell were up 50% at 164.00 pence Tuesday late morning in London.
The directors of Premier Farnell said they plan to recommend unanimously that shareholders vote in favour of the deal, and intend to do so for their 0.1% stake in the company. Datwyler has acceptances for its offer already representing 18.4% of Premier Farnell shares from shareholders GO Investment Partners Ltd, J O Hambro Capital Management Ltd and Majedie Asset Management Ltd.
Based on Premier Farnell's total net debt of GBP243.4 million, net cash proceeds from its sale of Akron Brass of GBP124.8 million and its pension deficit of GBP58.2 million, Datwyler said its offer implies an enterprise value of GBP762 million for Premier Farnell.
Datwyler said it believes the combination represents a "strong strategic fit", and the deal would create a "leading high-service electronic components distributor in Europe". It is expected to add to earnings per share immediately after completion, even before considering a boost from expected cost synergies.
The combined entity will target earnings before interest, tax, depreciation and amortisation run-rate synergies per year of CHF50 million to CHF70 million by the end of 2019, Datwyler said, and expects to incur one off implementation costs of CHF40 million over two years after the completion of the deal to realise the synergies, and additional capital expenditure over the same time period of around CHF80 million.
The combined group's revenue, based on adjusted 2015 figures, is around CHF2.5 billion, and it will target total revenue of over CHF3 billion by 2020.
The deal is subject to shareholder approval, as well as regulatory clearances in Austria, Germany, Poland and the US. Subject to approvals, the deal is expected to be completed in the last quarter of 2016.
Datwyler will fund the acquisition from its existing cash resources, and new bank facilities with UBS Switzerland AG amounting to GBP530 million.
Premier Farnell said that shareholders will remain entitled to receive its proposed final dividend for the year to end-January of 3.6 pence.
In a separate statement, Premier Farnell reported revenue of GBP247.2 million for its first quarter to May 1, up from GBP240.5 million the year before, helped by a strong performance in China and India.
The company saw sales up 1.5% in Europe, as sales per day growth in Continental Europe of 4.8% offset a 7.2% decline in the UK.
In the Americas sales fell 9.0% excluding its Brazil operations which were discontinued in 2015, hit by weakening US manufacturing conditions and competitive pressures. However, this was offset by a rise in sales in the Asia Pacific region, as sales per day in China were up nearly 25%, and in India up over 26%.
Following the sale of Akron Brass to IDEX Corp in February, Premier Farnell said it was on track to deliver annualised cost savings of GBP19 million by its year to end-January 2018. Additionally, Premier Farnell said it had undertaken a reorganisation of its US sales force in May to deliver operational efficiencies.
"The sales trends of 2015/16 continued into the first quarter of this financial year, with strength in Continental Europe and Asia Pacific and difficult trading conditions in North America and UK. We remain on track to make progress in this financial year, as we increase our operational efficiency and relevance to customers, and we implement the outcomes of our operational review," said Chief Executive Officer Jops Opdeweegh in a statement.
"I am pleased we have reached an agreement with Datwyler Holding Inc on the terms of a recommended offer for Premier Farnell. I believe the combination of the two companies represents a strong strategic fit and is highly attractive for customers, shareholders and colleagues," Opdeweegh added.
Opdeweegh took up the role in March, and whilst Mark Whiteling agreed to remain as deputy chief executive officer to support him, Whiteling will now step down from the board and leave the company following its annual general meeting on Tuesday.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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