Embattled engineering contractor Bradken Limited (ASX: BKN) jumped this morning on reports that its long-standing chief executive is about to resign.
The stock leapt 3.3% in early trade before paring gains to trade 2.3% higher at $2.04 as investors realise that Brian Hodges departure after an 18-year stint with Bradken won't change the challenging outlook for the debt-laden company.
The fact that the resignation is not official could also be dampening enthusiasm towards the stock with the Australian Financial Review reporting that Bradken could make an announcement sometime next week.
While it is true that Hodges retirement doesn't alter the fundamentals for the struggling contractor, some optimism on the changing of the guard is not misplaced as a headless Bradken is likely to be more susceptible to being acquired.
I highlighted this for fellow contractor Cardno Limited (ASX: CDD) following the sudden departure of its chief executive Michael Renshaw in January and Cardno was subsequently subject to takeover speculation.
There's certainly no lack of trying from corporate raiders to buy Bradken and I've highlighted a number of times that Bradken is likely to get swallowed up sooner rather than later.
Kohlberg Kravis Roberts was reported to have made an offer to buy the company after Bradken rejected Pacific Equity Partners (PEP) and Koch Industries $2.50 offer in April this year.
PEP and Bain Capital made a joint $5.10 a share bid for Bradken late last year before the deal fell through.
Shares in Bradken have been floundering badly since the first approach and any subsequent bid is likely to be lower than the last known offer price of $2.50 a share.
That's not great news as it means battle weary shareholders won't get a huge payday even if the company is acquired.
But given that Braken is saddled with nearly $600 million in debt compared to its shrinking market capitalisation of $373 million, I suspect many won't be in the mood to hold out for a higher bid.
It's not only Bradken that is under the earnings pump. The collapse in commodity prices has forced many miners to cut back on project spending while the anticipated pick up in civil construction work is yet to eventuate.
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