MENU

ALS Ltd share price soars on $2.7 billion takeover bid

The ALS Ltd (ASX: ALQ) share price has rocketed up 30% to $5.27, after the laboratory testing services company knocked back a $2.7 billion bid for the company from private equity firms Advent International and Bain Capital.

The proposal values each ALS share at $5.30 – for which shareholders would receive cash, but will not be adjusted for the 6 cents fully franked dividend to be paid out to shareholders on July 1. The bid price reflects a total of $2,672 million for ALS, and represents a multiple of 11.7x EV/EBITDA according to the company.

ALS says the bid materially undervalues the company for a number of reasons:-

  • Does not recognise the fundamental value of the company’s leadership position in a number of service streams
  • Is on a premium of 22.3% to the one-month average price – significantly below market average for transactions of this nature
  • The 11.7x FY 2017 multiple is materially below the average trading multiple of 12.5x for the company’s global peers
  • A multiple of 11.9x FY 2016 EV/EBITDA is materially below the most recent comparable transaction in the sector – the sale of LGC in December 2015 for a multiple of 14.2x EV/EBITDA.

The company also says it takes advantage of a cyclical low point for the company’s leading minerals business.

Well, you can hardly blame the bidders for trying to get the best price (lowest) they can and for ALS’s board to reject the bid, not only so they can try and extract a higher bid, but also so they are working in shareholder’s best interests – and as the saying goes, ‘you never take the first bid’.

Foolish takeaway

Shareholders will be hoping this takeover proposal doesn’t fizz out like recent similar bids for mining services companies Cardno Limited (ASX: CDD) and Bradken Limited (ASX: BKN).

The second offer for Cardno which was rejected by the board was at $3.45, and the company’s share price is now just 93 cents. ALS shareholders will be hoping their board doesn’t make the same mistake.

Why these 5 dividend shares are better bets than the companies mentioned above. Discover The Motley Fool's top 5 ASX dividend stock ideas for 2016 to get you started building a more diversified income portfolio that is paying you back!

The report is FREE! No credit card required.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.