A day after losing its place in the FTSE 100 to the fast-tracked commodity trader Glencore, engineering group Invensys is in demand.
The company, which reported lower orders in its rail business earlier this month, has been boosted by a buy note from Collins Stewart, which tipped the company as a possible takeover target or break-up candidate. Of course the idea is not new, and Siemens, ABB or a Chinese or US purchaser have all been mentioned in the past. Today Mark Wilson at Collins Stewart said sorting out the company's pension situation would be key:
We think a pension buyout may come sooner than the market expects. Such a deal would in our view make an approach from strategic bidders far more likely, potentially unlocking much greater upside for Invensys shares. The announced shift to a more decentralised holding company structure suggests management may agree with us.
Valuing Invensys' businesses on a sum of the parts basis implies 100p plus upside to today's share price. Both rail and operations management are more attractive to peers than in the past. Though Invensys has always been viewed by the market as 'for sale at the right price', it's only in the last few years that we think the strategic sense for peers to buy operations management or rail has become apparent. Invensys' separate businesses are likely to be very attractive to industry peers with the means to acquire.
Invensys shares have added 7.4p to 300.5p.
