Could a break up of engineering group Invensys be getting closer?
A recent note from Collins Stewart tipped the business as a possible candidate for takeover and demerger, and now an industry blogpost has speculated that the company's rail business may be sold to the Chinese. This is not the first hint of Chinese interest - indeed the former Invensys chief executive caused a stir last year when he suggested such an outcome was likely. Harry Philips at Evolution Securities said the rail business could fetch between £1.3bn and £1.5bn, although the company would need to solve issues surrounding its pension liabilities - he believes the pension trustees would want a significant amount of the cash – either on disposal or if Invensys wanted to return cash. He said:
A comment on the well read Jim Pinto blog suggested that the majority of the rail division was set to be sold to Chinese collaboration partner CSR with some mass transit technology going to Siemens. Normally a blogger's comment would not generate much attention but in the last few months it has been relatively accurate on events in the rail division. If, and it is a big if, rail is being sold then it generates a entire new dimension for the company which would potentially take it well past our sum of the parts of 450p. It also highlights that the balance of risk reward in the stock lies firmly in the latter – current trading okay, rail contract news to come and IOM going well – add in a disposal and some form of pension resolution and the stock goes much higher.
Not at the moment, however. Invensys is currently 5p lower at 305.8p.
