ITnet shares rise on bid approach

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The Independent Online

Shares in the IT services group ITnet surged yesterday as the company revealed it was in discussions that may lead to an offer, although it did not name its potential suitor. The shares jumped 9.5 per cent to 258.5p, valuing the group at £190m.

Shares in the IT services group ITnet surged yesterday as the company revealed it was in discussions that may lead to an offer, although it did not name its potential suitor. The shares jumped 9.5 per cent to 258.5p, valuing the group at £190m.

Speculation centred on Xansa, Capita and Computacenter, which are all involved in similar areas to ITnet. IBM and HP, the US technology groups, may also be interested. IBM has an existing relationship with ITnet and HP recently paid £163m for Synstar, the UK-based provider and manager of IT support services.

Matt Davis, an analyst at Williams de Broe, said: "ITnet has a strong and long established customer base in local government and this could just be an opportunistic attempt to catch investors while the stock is relatively cheap." Mr Davis believes a final price for the company may be close to 300p.

In June, ITnet lost its largest contract, worth £83m, for managing datacentre hosting for the Cabinet Office. A profits warning followed, resulting in the stock trading as low as 159p. The loss of that contract led to a £20m write-down as only £5m of £25m costs were retrieved. Although that was a high-profile loss, the company has expressed confidence for the remainder of the year and has signed a number of contract extensions with local government.

The company, which started life as the IT department of Cadbury Schweppes, had traded higher in bid speculation last week. Bridget Blow, the chief executive of ITnet, and a non-executive director of the Bank of England, owns more than 2 million shares and will increase her personal fortune by more than £6m if a deal is concluded at 300p. Ms Blow's holding is, however, unlikely to play any significant part in the bid as institutional shareholders own 42.7 per cent of the stock.

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