Here's why Recall Holdings Ltd rocketed up over 9% today

News of a rumoured takeover offer for Recall Holdings Ltd (ASX:REC) blasted shares up. What's behind the story?

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What: Shares of Recall Holdings Ltd (ASX: REC) shot up over 9% today, reaching as high as $5.71. What caused the $1.57 billion information management solutions company to react so strongly?

Bloomberg News released an article saying Recall Holdings may be a takeover target of Iron Mountain Inc. (NYSE: IRM), based on information from sources with alleged knowledge of the matter. Recall closed at $5.02 on Monday, but is currently around $5.50.

Recall Holdings released an announcement stating it is not in any discussions with Iron Mountain, a Boston-based data storage and information management company, or any other potential buyer.

So What: Recall is a spin-off company from Brambles Limited (ASX: BXB). Since listing in December 2013, the stock was up about 11.5% before today. Brambles, the global supply-chain logistics company, demerged from it because it wanted to focus on its core pallet and container logistics business. It unsuccessfully tried to sell the Recall business in 2012, so listing it on the ASX was the next best option.

Demergers usually see the spun-off company perform better than the original company after the split in the short term. Brambles is only up about 8.4% since the December demerger.

Now what: Recall said that if there are material developments in the future, it would inform shareholders. For now though it claims no knowledge of any takeover offer.

Recall's largest market is the Americas, followed by Europe and Asia respectively. Iron Mountain is the biggest US player in the data storage and information management sector and has a market cap of US$6.7 billion.

Recall announced its FY 2014 results last week. Pro-forma underlying net profit was US$70.1 million on US$836.1 million in pro-forma revenue. In constant FX terms, underlying EBITDA was up 5.9%.

In this information age with the internet and cloud computing, documentation in paper and electronic form still has to be stored, retrieved and eventually destroyed, so information management is a very necessary service. The stock has a 2.4% yield unfranked. Consensus forecasts are for earnings to decrease and then go flat over the next two years.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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