Cape, the energy support services group, has climbed another 8% as it confirmed speculation of a bid approach.
The company said after the market closed last night - and after a 13% rise in its shares - that it had recently received "a very preliminary approach from a third party which may or may not lead to an offer." This morning the shares have added 17.5p to 245p, valuing the company at nearly £300m.
Analysts speculated on the identity of the possible bidder, with private equity and trade buyers such as Bilfinger Berger or Harsco Corporation both mentioned. Oliver Wynne-James at Panmure Gordon said:
Despite its prospects Cape has not managed to sustain a credible valuation rating. As a result the high returns have attracted the intentions of what we presume to be a private equity bidder. In our view private equity could pay 300-325p per share. Cape has a valuable position in [worldwide] markets, nuclear and rig decommissioning work; however and with synergies trade could pay as high as 400p.
But Collins Stewart warned against expecting a quick sale of the business. Analyst Michael O'Brien said:
The wording of the statement suggests to us it is most likely a trade buyer than private equity or a management buyout. We would suggest an established industrial services company or a construction business looking at increasing its energy exposure, as the most likely.
We believe US buyers will be deterred by the group's asbestos history. Additionally, we do not rule out private equity - the group has had talks with private equity in the past.
The use of the words very preliminary highlight to us that the process has a long time to run, and given due diligence requirements in respect to contracts and the (now largely quantified) asbestos liabilities, we believe a short-term conclusion resulting in a successful bid is unlikely.
