Chloride, the power protection group, has been lifted recently by renewed bid speculation but the City is starting to question whether that is justified.
And after a positive move in the shares yesterday following a trading update, they are now down 3.1p at 184.1p. In a report today analyst Ian Robertson at Seymour Pierce was lukewarm on the prospects of a takeover bid, and listed the possible predators and the obstacles to any move on Chloride. He said:
We are changing our recommendation from hold to underperform – noting that the bid premium seems to have returned to the shares. We remain of the view that the bid is only a possibility and not a probability.
Our view is that [France's] Schneider does not really need Chloride and would face competition issues if it did try and undertake a deal. Eaton [of the US] remains somewhat constrained by the performance of its automotive, truck and aerospace businesses and its balance sheet. Emerson [also of the US] is clearly looking forward to a recovery in the network power business but the purchase of a European focused operation such as Chloride does not sit entirely comfortably with its recent purchases. In the Emerson first quarter results conference call earlier this week management stated that the 'probable' M&A spend over the rest of Emerson's financial year will probably be in the region of $500m to $600m. Although Chloride's £537m ($860m) enterprise value does seem to rule this out we note that this $500m-$600m figure is a net figure taking into account the disposal proceeds from the sale of LANDesk (approx $150m annual revenues) – a software business that Emerson gained as part of its acquisition of Avocent last year.
Chloride investors seeking their next hit of Emerson news don't have to wait long; the Emerson annual analyst event is on Friday 5 February 2010.
