U.S. electric component distributor Avnet Inc (AVT.N) agreed to buy Premier Farnell Plc (PFL.L) for 691 million pounds, topping an offer from Daetwyler Holding AG (DAE.S) for the British maker of the Raspberry Pi mini-computer.
Premier Farnell shares rose as much as 17.8 percent to 193.75 pence on Thursday, above Avnet's cash offer of 185 pence per share, suggesting that investors expect a bidding war.
Since Britain voted to leave the European Union on June 23, overseas suitors have flocked to the country in search of deals made cheaper by the sharp decline in the pound.
Japan's SoftBank Group Corp (9984.T) agreed this month to buy UK chip designer ARM Holdings (ARM.L) for $32 billion (£24.3 billion).
If the deal to buy Premier Farnell, whose low-cost computers help millions get online and learn coding, goes through, it will be Phoenix-based Avnet's largest ever acquisition.
"Bringing these two companies together allows us to capture market share earlier in the design process," said Gerry Fay, president of Avnet's electronics marketing worldwide.
In June, Switzerland's Daetwyler offered to pay 615 million pounds for Premier Farnell.
Premier Farnell said its board planned to recommend Avnet's offer and drop its support for Daetwyler's bid.
A Daetwyler spokeswoman said that the company had noted the rival offer and was "discussing further proceedings".
Peel Hunt analysts said the deal was made particularly attractive by the weaker pound.
Since Brexit, the pound GBP= had lost 11 percent against the dollar through Wednesday's close.
Avnet said it expected the deal to close before the end of the year and add to its earnings immediately.
Stifel analysts said Avnet's offer for Premier Farnell would hurt competition in continental Europe, a concern that was also raised when Daetwyler made an offer.
Premier Farnell, based in the northern English city of Leeds, has not been without its troubles.
Before Daetwyler made an offer on June 14, the British company's shares had lost nearly a third of its value since September, when it cut dividend and sold a non-core unit amid slowing sales growth in its key UK and North America markets.
Avnet shares were down 0.2 percent at $40.76 at 0140 GMT, while Daetwyler stock was down 1.5 percent at 133.70 Swiss francs.
Bank of America Merrill Lynch is advising Avnet on the deal, while Lazard & Co is advising Premier Farnell.
Indeed and with the strength of the USD and ChFr against the £ since the original bid there could be more to come. Market thinks there might be given the current 5p premium to the revised offer. Nice position to be in.
I guess all the folks that want 164p sell first
Then its the folks wanting 165p...sell next
No one is buying at my price ....yet !
Note from the RNS
A) "... requires the approval of Premier Farnell Shareholders representing at least 75 per cent. of the votes cast at the Premier Farnell General Meeting (either in person or by proxy)."
B) "J O Hambro, in respect of 15,000,000 Premier Farnell Share .... It will also cease to be binding in the event a third party announces a firm intention to make an offer for all of the Premier Farnell Shares for consideration of not less than 5 per cent. greater than the Cash Consideration,"
""""The offer from Dätwyler Holding, which is quoted in Zurich but controlled by the family vehicle of the two brothers who founded it, is pitched at 165p, 51 per cent higher than Premiers closing share price on Monday. It already has the blessing of investors speaking for 18 per cent of the company."""""
Interesting that only 18% is mentioned so far as backing the deal -- what about the other 82% - I mean I haven't given them my blessing yet
The shares seem quite widely distributed, since the top 10 institutions own only 31% of the share of Farnell :-
J O Hambro Capital Management Limited 7.51
Government Pension Fund of Norway 2.95
Harris Associates L.P. 5.40
Aberforth Partners LLP 4.71
Premier Fund Managers Limited 2.64
Vanguard Group Inc 1.79 0
Majedie Asset Management Ltd 1.70
M&G Investment Management Ltd. 1.63
Ennismore Fund Management Limited 1.72
BlackRock Investment Management (UK) Ltd. 1.36
Total: Top 10 institutions 31.41
Jack - correct it was £55 and it was made in May 2014 -- seems like an age now ---- when the stock was £53.5. The AZN board stated they wanted at least 10% above the £53.5 which wasn't a million miles away from the £55 offered.
In the meantime Pascal Sorryhat has spent a ton of shareholders money on really expensive acquisitions, many of which are loss making and in some cases have no revenue at all despite huge prices paid for the companies.
AZN revenue and profit has been in decline for over 5 years -- I sold at £47 and I wouldn't be surprised to see AZN revisit £20 -- and it wouldn't be cheap at that, given two of their main revenue earner drugs are still to come off patent.
Games -- Oh what to do with PFL? -- still watching
Execution risk is why they sell. But who is buying. Volume was healthy.
With stamp duty and dealing cost, only one buyer at 164
And they worry about exchange rate risk unless they hedged the 165, few hundred mil.
Did anyone question management on their recommendation at yesterdays agm.
Guess its hard work for execs getting the P&L back to where it was 2 years ago. Better to sell low and negotiate new LTIP with new owners.
I'm out at 163p having bought these at an avg 158p almost 12 months ago. Seeing as how badly they have performed since, I'm delighted with the deal and a small overall profit on my 11,500 shares. I'm also happy I've got some cash to invest in a falling market although maybe I'll wait until after the referendum to deploy....as ever GLA in future activities.
Swiss-based Daetwyler Holding AG has agreed to buy London-listed electronic component distributor Premier Farnell for 165p per share in cash.
The price represents a premium of around 51% to Premiers closing price on Monday and gives an enterprise value of £792m.
Datwyler believes the combination of Datwyler and Premier Farnell represents a strong strategic fit and is highly attractive, Premier said in a statement.
The transaction creates a leading high service electronic components distributor in Europe and the combined platform will enable the combined group to realise significant economies of scale compared to Daetwylers standalone strategy, particularly in the context of a large addressable and fragmented high-service electronic components sector worth approximately CHF30-40bn, in which the top five distributors have a sector share of little over 15%.
RBC Capital Markets said: Given the history, management changes, gross margin pressures, and the cycle - we see this as a good price. However, we would note the valuation is below that of key peer Electrocomponents (16E PE 20x, EV/EBITDA 16x).
Meanwhile, Peel Hunt said it reckons shareholders will approve the deal and on this basis, the brokerage upped its price target on the stock to 165p from 135p, maintaining its buy rating.
Electrocomponents rallied as Numis upgraded its price target to 295p from 275p and reiterated its buy rating on Monday following a trading update.
The company said it expected full year profits to hit the top end of market expectations after a solid fourth quarter in which the UK recovery gained pace.
Encouragingly, third-quarter declines in North America eased off and continental Europe remained on the charge to counterbalance Asian declines and enable 2% growth in group fourth quarter sales and 3% for the full year.
The FTSE 250 company said the final quarter had seen further stabilisation in the gross margin, with the year-on-year decline reducing to 0.4% points, having been down 1.7% points in the first half of the year. This means, management said, that full-year gross margin should be down around one percentage point on the previous year.
Management's pre-close trading update indicates that the full year 2016 pre-tax profit out-turn will be around the top of the consensus range, which we attribute to a combination of a strong fourth quarter sales per day (SPD) performance, currency, and having delivered at least £6m of cost savings in the year to March 2016.
We have upgraded our 2016-18 forecasts by around 2-3%, and our price target to 295p (previously 275p).
However, given the macro-economic uncertainty, Numis left its SPD growth assumptions broadly unchanged.
Net financial liabilities (including preference shares) for total operations decreased to £243.3m from £256.6m at the end of the prior financial year. Net financial liabilities fell in the year due to the cash generated from working capital actions undertaken as noted above. This was offset by an increase of £8.7m, due to the impact of exchange rates principally in relation to our US$ denominated private placement notes, and other non-cash movements of £3.9m.
Net cash proceeds arising from the disposal of Akron Brass will be used to reduce Premier Farnell's existing indebtedness including the redemption of all its preference shares.
At the year end, net debt to adjusted EBITDA was 2.6x and headroom on bank borrowings was £216.5m under facilities in place until September 2019.
The pro forma impact of the disposal on the Group's total net indebtedness as at 2 August 2015, as if the disposal had occurred on 2 August 2015, was a reduction of £115.1 million from £235.3 million to £120.2 million."
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