The independent directors of Harvey Nash Group (HVN) and the board of an entity of DBAY Advisors Ltd “are pleased to announce” that they have agreed terms for a recommended cash offer for Harvey Nash. With this technology recruitment and outsourcing group having recently emphasised “the strong organic growth reported in the second half of last year has continued into the current year and the first quarter is tracking ahead of budget… we are confident of continuing to make significant progress in 2018”, a premium price?...
… “130 pence in cash for each Harvey Nash share and one interim dividend of up to 1.75 pence… a premium of approximately… 16.6 per cent. to the closing price of 111.5 pence per Harvey Nash share on the last practicable date”. Er, not exactly a massive premium then – and what about against the valuation on financials? Post that last trading update, there were forecasts for current year earnings per share rising from 11.5p last year towards 14p - and net debt declining and moving to a net cash position next year. That also suggests the offer far from generous.
It is argued that the offer price also “represents a premium of approximately… 91.9 per cent. to the closing price of 67.8 pence per share on 6 March 2017, being the business day prior to the day on which DBAY first announced a disclosable holding in Harvey Nash; 35.8 per cent. to the average closing price of 95.8 pence per Harvey Nash share in the twelve month period prior to the last practicable date” and that “there remain significant political and economic uncertainties in the medium and longer-term which may impact Harvey Nash's future performance”.
However, then also admitted is that “over the last two years, Harvey Nash has benefitted from a major transformation programme” and “the company now is better placed to react to any changes to market conditions”. I don’t consider these latter factors adequately reflected in the offer price, and if I were an investor here - i.e. with a long-term horizon - and though it may result in some short-term share price pain from the now 130p, would reject the offer.
Filed under: Harvey Nash, HVN, Tesla, Lucian Miers, BlueJay Mining, SP Angel, Imaginatik, Conroy, Tern
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