Numerica in merger talks with rival BDO Stoy Hayward

James Davy
Tuesday 11 November 2003 01:00

Numerica, the aim-listed accountancy group, yesterday confirmed that it was in talks with its bigger rival, BDO Stoy Hayward, regarding a possible offer for the company following weekend press speculation.

A merger between the two would create the UK's fifth-largest accounting group and according to Numerica's chief executive, Tony Sarin, would represent a "progression to the next level" for the company, adding that it was "strategically possibly the right thing for us to do".

It is understood that the price of any offer would be about 65p per share, valuing Numerica at approximately £35m. This would net Mr Sarin in the region of £750,000 for his 2.2 per cent stake in the company.

Numerica shares originally listed in October 2001 at 100p and reached 119.5p in mid-2002 but dropped as low as 36.5p earlier this month as the company suffered from what Mr Sarin calls "the benign and flat economy", which has affected demand for its advisory and business recovery services.

The company issued a profits warning in September, saying that it anticipated making a small loss for the traditionally quieter first half to September 30 in "challenging" business conditions. However, "things are picking up" now, according to Mr Sarin.

Mr Sarin said that he expected to join any combined entity although he added that an"element of rationalisation" was a likely result of any takeover.

Stoy Hayward has more than 200 partners while Numerica has about 50 partner-equivalents. Andrew Shepherd-Barron, an analyst at KBC Peel Hunt, said the move by Stoy Hayward was "opportunistic" and added that the businesses were "fairly culturally compatible". Mr Shepherd-Baron also said that a full takeover price "would be 65-85p per share on the basis of 80-100 per cent of turnover" and did not rule out the emergence of a competing offer. "Numerica's underlying businesses are performing well in a tough marketplace," he added. He, too, felt that some "central costs would have to go" in any merger.

Numerica has made nine acquisitions since becoming the second accountancy-based business to list on the Stock Exchange, after Tenon in 2000, with the strategy of "integrating profitable entrepreneurial accountancy practices and other specialised service businesses".

In recent times the company has been at the centre of a row between its house broker Collins Stewart and one of the broker's former analysts, James Middleweek, after the analyst alleged he had been pressured by his employers not to write anything negative about Numerica. Mr Sarin said Numerica had supported Collins Stewart throughout the furore, adding that Numerica had "hit our numbers in the time period that he [Mr Middleweek] was covering".

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