10th Jul 2015 11:48
LONDON (Alliance News) - N+1 Singer says that collagen products maker Devro's deal to acquire PV Industries "stacks up financially and strategically" and strengthens the group's position in the gel end of the meat processing market.
Devro on Friday announced that it has signed a deal to buy Dutch PV Industries for up to EUR13.5 million. It said it will pay EUR12.5 million initially, with another EUR1 million due under an earn-out arrangement.
"The key point here is that this is a business which management has been monitoring for a while, and we understand there were other parties interested. Strategically given PVI?s strength in gel casing (as opposed to collagen casing) the deal enhances Devro?s European proposition in this product category to complement an already strong position in the US," N+1 analyst Sahill Shan says.
The broker says it expects the deal to be earnings neutral for the current year and should add a couple of percent to its earnings per share for the financial year 2016.
"Management is doing all the right things to resurrect growth and if it executes, earnings should grow by around 50% by FY17," Shan says.
N+1 Singer holds a Buy recommendation on the stock and a price target of 335 pence.
Shares in Devro are trading up 0.4% at 310.42p Friday afternoon.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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