15th Nov 2024 14:23
(Alliance News) - TT Electronics PLC on Friday confirmed it has rejected Volex PLC's takeover proposal, with a higher bid from a third party also being declined.
The Woking, Surrey-based manufacturer of electronic components said it rejected the unsolicited approach as "fundamentally undervaluing TT Electronics and its long-term prospects".
It added that it recently rejected an all-cash indicative offer from an unnamed party at a significantly higher value than presented by the Basingstoke, Hampshire-based specialist integrated manufacturer of critical power and data transmission products.
TT said there were no discussions ongoing with the third party, and it urged shareholders to take no action.
According to the takeover code, said TT, Volex has until 1700 on December 13 to either announce its intention to make an offer or its intention to not do so.
Earlier on Friday Volex revealed it had made two takeover offers for TT Electronics, but said TT's board has refused to engage in talks.
Volex said its initial bid for TT valued its shares at 129.0 pence.
The offer was for 62.9p in cash coupled with 0.203 of a new Volex share per TT share.
Volex followed up with an offer valuing TT's shares at 135.5p. However, per yesterday's closing price for Volex, the implied value is now 139.6p, a 77% premium to TT's closing price of 79.0p on Thursday.
The second offer which comprised 62.9p in cash with 0.223 Volex shares per TT share values TT at GBP248.6 million.
Off the back of the approaches, TT shares were up 40% to 110.32p on Friday afternoon in London. By contrast, Volex shares were down 11% to 305.00p.
Volex said its proposal represents a "highly attractive opportunity" for TT shareholders, but noted that the TT board has declined to engage with its team, rejecting both proposals.
Volex Executive Chair Nat Rothschild said: "We believe that bringing Volex and TT Electronics together in a highly synergistic transaction would create a scaled and diversified leader in the specialist electronics market which would act as a platform for future organic and inorganic growth and significant value creation."
Volex announced its plans to buy the firm the day after TT shared a trading update and revealed its long-standing chief financial officer, Mark Hoad, is intending to retire in September next year.
In the four months to October 26, TT reported a 1% reduction in organic revenue year-on-year, with 10% growth in Europe and 11% growth in Asia more than offset by a 16% decline in North America.
The firm said its North America division was hurt by previously disclosed operational challenges and a subdued components market.
TT revised its adjusted operating profit expectations for 2024 to be in the lower end of its previously guided range of GB37 million and GBP42 million. This would be down from GBP52.8 million in 2023.
The firm said its leverage guidance remains unchanged, expecting it to be around or at the top end of its previously stated 1-2x range.
Separately on Friday, Volex announced its half-year results, revealing improved profit and revenue figures.
In the six months that ended September 29, revenue jumped 30% to USD518.2 million from USD397.5 million a year before, driven by notable sales improvements across its Electric Vehicles and Consumer Electrics divisions.
Pretax profit rose by 21% to USD26.5 million from USD22.0 million, with Volex identifying agile resource management and cost control as contributors to its profitability.
The firm said its positive trading was supported by strong procurement practices and a continuous improvement programme across all sites.
Volex lifted its interim dividend by 7.1% to 1.5p from 1.4p.
Volex said it expects to meet its full-year expectations for financial year 2025.
Executive Chair Nat Rothschild said: "The strong performance during the period demonstrates once again that our strategy is working.
"Our unique capabilities, combined with a commitment to service and quality, ensure we meet the highest standards across all projects.
"The progress we have made in the first half, combined with our ongoing growth investment, gives us confidence in our ability to meet full year expectations."
By Christopher Ward, Alliance News reporter
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