Contracting services company Transfield Services Limited (ASX: TSE) has soared 27% on the ASX today to $1.91, after the company received a takeover offer from Spain's Ferrovial Servicios S.A for $1.95 per share.
The deal values Transfield at around $1 billion dollars, but the company's chairman Diane Smith-Gander says the proposal "does not reflect the underlying value of Transfield Services shares".
Despite that comment, the chairman says Transfield believes "it is in the interests of shareholders to conduct exploratory discussions with Ferrovial". Those discussions will obviously be about extracting a potentially higher bidding price, which the board can take to shareholders.
The company is giving Ferrovial some due diligence information on a non-exclusive basis, perhaps inviting other companies to make a bid for the contracting company.
Ferrovial recently withdrew from talks to buy Leighton Holdings Limited's (ASX: LEI) John Holland construction business or its services business. Leighton, which is now majority owned by another Spanish company Grupo ACS, rejected both of Ferrovial's bids for John Holland, which appeared to be much lower than Leighton was willing to accept.
Ferrovial obviously sees value in Transfield's businesses. After bidding 4 times and 5 times earnings before interest, tax, depreciation and amortisation (EBITDA) for John Holand, Ferrovial's bid for Transfield is around ten times EBITDA. That suggests Transfield is worth twice as much as John Holland.
Transfield generates 51% of its revenues from operations and maintenance, 29% from logistics and facilities management, with the remainder from consulting, construction and well servicing. Ms Smith-Gander says the company sees a strong future pipeline of growth in Energy, Defence, government services and infrastructure. Earlier this month, Transfield said that pipeline contained $24 billion worth of contracting opportunities.
By no means is the takeover a fait accompli. Should it fail to go ahead, Transfield shares could shed all of today's gains plus more.
