Shares in VT Group - the former shipbuilder turned support services specialist - have dipped more than 3% as it confirmed it had approached smaller rival Mouchel about a takeover.
VT is currently down 17p at 524.5p, one of the biggest fallers in the FTSE 250, while Mouchel, which specialises in highway and government services, is 54p better at 244p. VT made two approaches over the past four week about a possible offer, with traders suggesting a price of around 250p. But VT added that Mouchel had refused to enter into any form of discussion, and VT was continuing to review its options.
For its part Mouchel said the approaches substantially undervalued the company and had been rejected. "The board understands VT remains interested in pursuing a transaction," Mouchel said.
There is some speculation that the likes of Serco or Capita could also step into the ring.
Meanwhile Investec moved its recommendation on VT from buy to hold, saying:
Our buy case on VT was centred on the group's strength in engineering-related outsourcing services and the potential to add to this with its financial firepower. Confirmation that the group has made two (rejected) approaches to Mouchel has dented our confidence in the next strategic move. Mouchel has a significant level of highways and consulting work that is, in our view, lower quality than VT's existing services, and at risk from public expenditure cuts.
However Panmure Gordon was more positive on VT:
[We] suspect VT would have to bid above 250p to make further progress on this, although would expect this potential acquisition to be EPS enhancing below 300p. While a transaction of this nature would carry execution risk, we can see strategic fit between the businesses and if restructuring/profit
warnings are behind Mouchel, this deal should generate long term shareholder value. We await further announcements with interest.
On Mouchel Panmure moved from sell to neutral, saying:
With interest now focused on the group a negative recommendation is no longer appropriate so we move to a neutral stance. Our target price remains unchanged at 190p.
