Elis threatens hostile takeover of Berendsen
French laundry services group Elis is threatening a hostile takeover of UKbased rival Berendsen after the target’s board of directors repeatedly rejected its cash and share offers. Elis yesterday said it was taking a new offer of 440p in cash and 0.426 new Elis shares for each Berendsen share straight to shareholders. This valued Berendsen at just over €2bn.
Elis is one of a flurry of foreign companies looking to take over UK rivals this year as the decision to leave the EU has weighed on the pound, making company valuations more attractive.
Elis said yesterday that combining the two companies would “create a strong pan-European leader in textile and facility services”, with the promise of “significant” cost reductions. Berendsen shareholders would own 35 per cent of the combined group. But Berendsen quickly responded that the offer “very significantly undervalues” the company and that the Berendsen management “does not see the basis for any further discussions with Elis”.
Berendsen has seen two profit warnings since October last year amid operational problems in its UK linen business that has sent shares down as much as 40 per cent.
The management is arguing that it is fixing the problems, and that the 35 per cent premium being offered by Elis this week is an attempt to buy the company on the cheap.
Analysts said the decision by share- holders to accept the Elis deal or not will reflect their confidence in the management’s own ability to turn round the company.
“Target management will no doubt argue that they can produce a standalone share price in excess of the bid value, the question Elis is asking is whether shareholders really believe that,” Olivetree analysts said in a note.
Iain Ferguson, chairman of Berendsen, urged shareholders not to support the offer, saying it was “highly opportunistic and does not reflect the inher-
The offer is ‘highly opportunistic and does not reflect the inherent value of our business’
ent value of our business”. He added: “The proposed combination would result in substantial risk: it increases execution risk against the existing strategy and introduces material integration risk.”
Jane Sparrow, an analyst at Barclays, said the rational behind the Elis deal was sound: “The proposal makes geographic sense to us with Berendsen strong in UK and Scandinavia, and Elis strong in France.”
She added that there would be opportunities for synergies in the Benelux region and the opportunity to build scale in Germany and the deal was “worthy of consideration” by Berendsen.