INVESTORS in Spice, Britain’s largest installer of water meters, have signalled private equity house Cinven will have to significantly improve its £316m approach for the company if deal talks are to open.
Spice’s board last week rejected an indicative offer of 56p per share from Cinven as “opportunistic”. Although the offer represented a 51.5 per cent premium to Spice’s closing price the day before the approach, the shares rallied in the intervening period after Spice disposed of its troubled gas business.
Based on Friday’s closing price of 54p, Cinven’s approach now represents a premium of just 3.7 per cent. Geoff Allum, an analyst at Arden Partners, suggested Cinven would need to up its offer to 75p per share or £423m to get the utilities services company to the table. He cited the appointment of chief executive Martin Towers, a number of contract wins and the possible £10m sell-off of the firm’s facilities business as positive factors.
Several shareholders said they backed management’s decision to immediately knock back the European buyout outfit. One smaller companies fund manager from a well-known institution said: “56p is the wrong price by a million miles so I have no problem with management turning it down. Cinven is being incredibly opportunistic.”