Shares in Kentz leapt 24 per cent after the FTSE 250 engineer rejected two takeover offers yesterday, triggering City expectations of an £820m multi-way bidding battle.
Kentz said that Amec, its larger, London-listed rival, had made a cash offer of between 565p and 580p a share, sharply higher than the Friday closing price of 476p. That was itself 10 per cent higher than the price on 5 August, when Amec first made its intentions clear to Kentz, after first contacting the engineer in July.
The British company added that the German construction group M+W, owned by the private Austrian conglomerate Stumpf, had also talked to its board about an offer, lower than Amec’s, but that Kentz had rejected both approaches as they “undervalued the company”.
The City, however, expects a bid battle. “A lot of companies could come in and join the fight for Kentz,” said one engineering analyst, who named the US giants Fluor and KBR as potential buyers. The Canadian engineer SNC-Lavalin has also been linked to an approach.
“For companies who want a bigger role in construction, or that may be struggling to grow, like Amec, Kentz seems like a sensible deal.”
The approach by Amec, the blue-chip oil equipment services group, values its smaller rival at £680m; but City sources said Kentz, which started out as a family-owned electrical business in south Tipperary in 1919 and floated on AIM in 2008, could fetch up to 700p a share, valuing it at almost £820m.
“If a deal was to go ahead at anything less than 700p, we would regard it as a very cheap acquisition,” Dougie Youngson at VSA Capital said. Kentz now has mining, oil and gas and infrastructure projects across the globe, a market capitalisation of almost £700m and 14,500 employees. Amec’s work for companies such as BP and the US navy has given it a market capital of £3.2bn and annual revenues of £4.2bn.
Amec said it wanted to buy Kentz to “extend [its] geographic footprint in the growth regions, increase the range of services offered to clients, and enhance its position in oil and gas and mining.”
But a source close to Kentz said the company “never was, is not and will not be organising a strategic process to dispose of the business”. He added that Kentz’s investor list was “stuffed with long-only conviction shareholders”, including its Malaysian backer Kerbet, which bought the company to market in 2008 and retains a 13 per cent stake. Standard Life owns 7 per cent, Legal & General 6 per cent, and Schroder 5 per cent.
The company could face scrutiny from the Financial Conduct Authority, the City watchdog, over a 10 per cent jump in its shares before Amec and Kentz went public about their talks yesterday. The FCA said it could not comment on individual cases. Shares in Kentz rose 115.1p to 591p yesterday.