Middle East firm swoops for stricken Carillion
INVESToRS piled into struggling builder Carillion yesterday after rumours of a takeover by a Middle Eastern business.
The firm – which suffered a crash after writing off £845m of contracts – is due to unveil delayed half-year results tomorrow.
It is understood a buyer from the Gulf will swoop in once the figures have been revealed, with the aim of snapping up the company for a knockdown price.
This will give the mystery bidder a valuable London Stock Exchange listing, so it can raise money more easily from the City. Traders were delighted by the rumour, and shares jumped 21pc, or 9.75p, to 56.25p.
The price of the company is almost immaterial given the biggest headache for a suitor will be Carillion’s estimated £695m of debt – a figure far greater than the £242m value of the business.
Anyone willing to buy it will also have to grapple with a black hole in the pension scheme estimated to be more than £650m.
Hargreaves Lansdown analyst George Salmon said that a fresh fundraising drive from existing investors is likely if a white knight fails to emerge.
‘Speculation that a Middle Eastern group is close to an offer for Carillion has provided some muchneeded relief for investors today, but there’s no getting away from the scale of the challenge facing the beleaguered group,’ he said.
‘If a deal isn’t done, shareholders may well need to brace themselves for a rights issue.’
The business helps maintain Britain’s railways and roads and is also a well-known player in the Middle East and North Africa, where it made 15pc of its revenues, or £786.7m, last year.
Shares have slumped by 70pc since July, after a profit warning was declared and chief executive Richard Howson quit. Last month, the business suffered the humiliation of falling out of the FTSE250 index and into the world of small-caps.
Tomorrow’s announcement will give interim boss Keith Cochrane a first chance to set out his stall and explain how the business plans to turn itself around.
However, major investors may be braced for an offer which fails to match the company’s longterm prospects if it stays independent and returns to health. David Madden of trading business CMC Markets said: ‘The troubled construction company may welcome the takeover approach as it is struggling with high debts, but some shareholders might feel they are being targeted near the all-time low.’
The rumoured bid comes after recent reports the company was looking to sell its Middle East operations, with a raft of local firms said to have been interested.
It is a rare setback for the many hedge funds gambling on a further fall in the share price.
Carillion is the most bet-against stock in Britain. Hedge funds are short-selling at least 21.5pc of shares, meaning they make a profit when the stock drops.
Despite yesterday’s surge, these vulture investors will have made huge profits since the start of the year.