Belgium’s TVH Services and UK’s Ashtead’s joint take-over bid of £189 million for rental equipment company Lavendon Group fell flat for the second time.
TVH Services had earlier offered 111 Pence for each share of Lavendon in early December, valuing the company at £183 million. Lavendon had rejected the offer, saying it undervalued the company significantly.
The latest joint offer of 115 Pence a share is nearly 45 percent higher than the closing price of November 30 – the day when the first unsuccessful bid was made.
Lavendon issued a statement after turning the latest proposal down saying: “The board believes that the approach from Ashtead and TVH is opportunistic and significantly undervalues the company. Accordingly, the board has no hesitation in unanimously rejecting the proposal”.
Adding that the business was recovering slowly, it added: “Group revenues for the six months since the half year, excluding ex-fleet equipment sales, increased by 3% over the same period in the prior year, reducing the rate of revenue decline for the year ended 31 December 2010 to 3% (2% on a constant currency basis), compared with the same period in the prior year”.
However, analyst Philip Sparks of Evolution Securities has cut the target price of Lavendon by 5 pence to 115 Pence and calls the current offer price fair.
“It will be interesting to see if this flushes out any interest from private equity”, added Mr. Sparks.
However, Lavendon justified the refusal on ‘undervaluation’ grounds stating: “Cash generation has remained strong and the group’s net debt has continued to reduce, slightly ahead of our expectations. As at 31 December 2010, the Group’s net debt was £140m. Lavendon has committed banking facilities in place until September 2013, and the facility headroom at 31 December 2010 was £64m.”
Mr. Sparks agreed to Lavendon management’s observation on free cash generation saying: “Lavendon has a relatively young fleet compared to many of its competitors, thus it could slash its capex for a few years and generate huge amounts of cash”.
“It will be interesting to see if this flushes out any interest from private equity”, he said when asked about the possibility of an investor exit and added Lavendon “will have to make a very strong case for remaining independent” to prevent that from happening.