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Takeover: Why the Worleyparsons Limited share price rocketed 29% this morning

The Worleyparsons Limited (ASX: WOR) share price rocketed 29% to $10.43 this morning after media reports forced management to acknowledge that the company had received a takeover offer at $11.80 per share in November last year.

The offer was made by Dar Group, a consultancy firm headquartered in Dubai that is also a significant shareholder in Worleyparsons with a 13% stake. Dar Group’s original takeover offer was contingent on receiving unanimous support from the Worleyparsons board, but the board declined to engage with Dar Group and there has been no further discussion between the parties since the time of the initial proposal.

Worleyparsons’ board did not accept the offer, after receiving financial advice and concluding that the proposal undervalued the company. Management took the view that the company’s potential, including the quality of its platform, the trajectory of historical commodity price recoveries, and the company’s cost savings were not adequately reflected in current earnings or Dar Group’s offer.

What’s a shareholder to do?

That’s a tough question, since Dar Group has not lifted its offer, and the proposal apparently died in November last year. Shareholders must either hope that a better offer materialises, or wait for a cyclical recovery and trust that management’s appraisal of value is accurate.

Shareholders who bought during the previous 12 months are likely sitting on a nice profit, although longer-term shareholders will be underwater on their investment. Personally speaking, I’d avoid Worleyparsons and invest in a company that’s growing profits and dividends.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. 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.

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