Bottom Line: Hang on in there for an even higher value

 
Elizabeth Fournier

INVESTORS in Kentz aren’t used to such a rollercoaster ride. Though shares have climbed steadily since its market listing in 2008 – no doubt pleasing its big institutional shareholders – for the past 12 months at least its shares have hovered somewhere between 350p-450p.

Yesterday that all changed. Shares climbed a massive 115p during trading, adding almost a quarter to the 94-year-old firm’s market cap and sending it way above the offer price from both Amec and M&W.

If a higher bid is what Kentz is looking for, then being thrown into the public eye is just what it needs. While the firm insisted yesterday that its strategic review was not designed to lead to a sale, analysts are already throwing around names of some industry big hitters who may now have the inclination – as well as the cash – to sweep the board off its feet.

If a sale does come through, then whoever buys the firm will be getting their hands on an asset with a strong order book and pipeline, as well as a decent pile of cash – predicted to come in at around $220m when it updates the market next week.

With shares already trading way above most target prices, the temptation is strong to jump ship and make the most of a decent selling opportunity.

But for the next few weeks – especially with an upbeat set of interims due next Tuesday – the only way for Kentz is likely to be up.

Investors who hang in there will be rewarded for their patience.

PROFILE: O’DONNELL VERSUS BROWN

INCUMBENT chief executive Christian Brown took the helm of Kentz in February 2012, succeeding Hugh O’Donnell, who stepped down after 12 years in the role. Those who knew him during his tenure at the top refer to O’Donnell as a smart, youthful and decidedly unconventional Irishman, with flowing blonde locks and shirt open to the navel. While Brown may not be as charismatic, he has his fans. “He has good industry experience, coming from [US engineering firm] KBR and comes across well,” Daniel Slater of Arden Partners told City A.M. “I think he gives a lot of confidence in how he manages the business.” With Kentz now under the spotlight, Brown’s performance will be under more scrutiny than ever. “I think he has got his head round the business pretty well,” added Slater. Another source commented that long-term strategist Brown does not want to sell the company and is “terrified” that a bidder will come in with a high enough offer to win shareholder approval, “and there will be nothing he can do about it”.