Bradken Limited's shares surge 32.5% on takeover offer: Is there time to buy?

Bradken Limited (ASX:BKN) along with other contractors will be receiving attention from investors looking for merger and acquisition plays.

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What: Fortune has favoured the brave today for value investors prepared to wade into the market and purchase beaten-up mining services companies over the past year.

Pitched at $5.10 a share, Bradken Limited (ASX: BKN) shareholders have received an offer for 100% of the share capital from private equity firms Pacific Equity Partners (PEP) and Bain Capital Asia. It's noteworthy that the offer is lower than a previous tentative offer made by the duo back in August, which was pitched at $6 a share. Based on the revised offer, the potential acquirers are offering $872 million for the whole company.

For new shareholders, the offer price represents a significant premium to Thursday night's close of $3.32, however long-term shareholders may be unenthused by the proposal given the stock was trading north of $8 as recently as 2012.

Takeover Arbitrage Opportunity

Interestingly, at noon on Friday, Bradken's shares – despite the leap – were still only trading at around $4.30 per share providing investors with a potential risk-arbitrage opportunity of nearly 20% should the transaction complete. The significant discount would suggest many market participants are wary that a change of control will ultimately eventuate, however for investors who allocate a portion of their portfolio to these types of strategic investments, Bradken may be one worth taking a closer look at.

What now: Investors will also no doubt be casting an inquisitive eye over fellow engineering contractors and mining service providers such as Seven Group Holdings Ltd (ASX: SVW), Downer EDI Limited (ASX: DOW) and UGL Limited (ASX: UGL). The offer price for Bradken would appear to prove that there is some value within the sector.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned.  

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