FTSE 100-listed engineering firm Amec yesterday said it would not make a takeover offer for smaller peer Kentz, quashing hopes of a deal ahead of Monday’s put-up-or-shut-up deadline.
Amec made an approach last month of 565p to 580p per share, equating to £680m, but Kentz rejected the offer claiming it undervalued the company.
Amec said today that “the pipeline of opportunities remains strong” for other acquisitions and reiterated that cash returns to shareholders would be considered if no deal had come to fruition by the fourth quarter of 2013.
Kentz’ shares plummeted over ten per cent on the news in early trading, while Amec rose around two per cent on investor hopes of a share buyback.
It is understood that the two parties embarked on further talks after Kentz’s approach was rejected, but there was no agreement on the value of the company and Kentz refused to open its books to Amec without a higher offer on the table.
Amec is currently in discussions with other potential acquisition targets that it is actively considering. Kentz’s management is not thought to be searching out other takeover offers but would consider future bids at a higher price.
“While it is disappointing to see the share price fall following the withdrawal of the Amec bid, we remain firmly of the view that the future prospects for Kentz are strong and as such the Amec bid undervalued the business,” Nigel Yates, UK equity fund manager at NFU Mutual – a top 10 shareholder in Kentz – told City A.M.
Kentz also rejected an approach from German construction firm M+W last month, which was lower than Amec’s offer although the value was not disclosed. M+W has not yet released a statement so Kentz is still formally under the offer period until Monday.
Kentz’ shares closed 9.2 per cent lower at 499p, while Amec’s rose 1.9 per cent to £10.78.