Servelec gives nod to £224m bid from Montagu
SOFTWARE FIRM Servelec has recommended a £224m cash offer from private equity firm Montagu although analysts said a rival bidder may step in.
Sheffield-based Servelec has been through a torrid time. In September it reported a return to growth in revenue and profit in the first half of the year, but said some orders have been deferred which will reduce its anticipated growth for the full year.
Montagu has offered 313.1p cash for each Servelec share, which represents a 19.8 per cent premium to Servelec’s closing price on Wednesday.
Analyst Chris Glasper at N+1 Singer said: “Servelec’s board has recommended an offer from Montagu PE to take the company private.
“At 313.1p, the offer looks a decent outcome given the short term challenges the group faces in both Health & Social Care and Automation.
“We continue to see strategic value in the group (a reason we selected Servelec as one of our Key Ideas for the year) and as such, would not rule out a counter bid from a trade buyer. Await developments.”
Montagu’s offer is a 27.1 per cent premium to the volume weighted average price per Servelec share of 246.4p during the three months to November 22.
The offer is conditional on the approval of Servelec’s shareholders.
Since its formation in 1968, Montagu has invested in over 400 companies across the software, technology, transport, logistics, healthcare, business services and manufacturing sectors.
Servelec provides software, hardware and services to the healthcare, social care and education, oil and gas, energy and utilities sectors and employs 600 people.
Montagu said Servelec is one of the UK’s leading technology businesses with strong, diverse product sets and market positions in both of its divisions.
The private equity firm said that private ownership will enable Servelec to pursue opportunities that it would not be able to on the public markets.
The proposed sale follows a comprehensive review by Servelec’s directors which concluded that a sale of the group as a whole would be in the best interests of shareholders.
Whilst Servelec’s directors believe there is potential for future growth in the group’s equity value, they said the group operates in a number of distinct markets, each of which is competitive and requires a different strategy.
Montagu has secured the backing of investors who hold a 33 per cent stake in the company.
Montagu director Edward Shuckburgh said: “Servelec has two high quality divisions with significant growth opportunities, both organically and through potential acquisitions.
“We are excited to work with management and employees to support the Servelec Group’s growth by investing in and expanding its strong market positions domestically and internationally, leveraging Montagu’s experience, network and resources to strengthen the business.”
Servelec’s chairman Richard Last said: “Servelec Group has made good progress in the four years since its IPO, growing both organically and through acquisition.
“The offer from Montagu represents an attractive and certain value, in cash, today for our shareholders. Investors who invested at the IPO will have achieved a total return of approximately 185 per cent on that investment, including dividends.
“We are pleased that Montagu will continue to support the ongoing organic and acquisitive growth strategy in place.”
In September, Servelec said cash conversion has returned to anticipated levels and the group is aiming to be debt free by the end of the year.
However, it has seen a deferment of orders in some areas of its automation business.