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Qube share price on the watchlist as Chalmers takeover edges closer

The Qube Holdings Ltd (ASX: QUB) share price is on watch this morning after the latest update from its takeover target Chalmers Limited (ASX: CHR) was announced yesterday. 

What did Chalmers announce yesterday?

Following Qube’s off-market takeover offer to acquire all of the shares of Chalmers, the company announced yesterday that it has completed mail dispatch of its target’s statement to shareholders.

Chalmers’ directors have unanimously recommended that shareholder accept Qube’s offer in the absence of a superior proposal, with supporting reasons set out in full in the dispatched document.

The update moves Qube one step closer to its acquisition, after the company announced its intention to takeover Chalmers on 28 June 2019.

What’s behind Qube’s takeover offer?

Qube’s off-market takeover bid through a wholly-owned subsidiary constitutes an offer of 2.31 Qube shares or $6.50 in cash per Chalmers share held.

The consideration offered by Qube values Chalmers at approximately $60 million, while the company’s share price was trading around the $4.35 per share mark in the months prior to the Qube takeover offer.

The Chalmers move is the latest as Qube looks to boost its portfolio, after it announced on 10 May 2019 that it was acquiring mining and industrial company LCR and its subsidiaries.

Total consideration paid for the LCR Group came in at $135 million which was funded through Qube’s existing undrawn debt facilities.

Qube CEO Paul Digney said at the time that the LCR acquisition would provide Qube with the ability to deliver an enhanced broad spectrum of mining and industrial services to its existing and future customers.

How has the Qube share price performed in 2019?

While acquisition behaviour is typically negative for the acquirer’s share price, Qube has defied the trend as its share price has surged 23% so far this year.

The company’s balance sheet seems to be intact despite the outlay’s, given its headroom on existing debt facilities, and the Aussie logistic company now boasts a market cap of nearly $5 billion.

Qube is currently trading at 25x earnings, which is above that of the S&P/ASX 200 (INDEXASX: XJO) index average and the key to living up to its value will be its ability to manage its synergies and expand its network in a controlled and steady manner.

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Motley Fool contributor Kenneth Hall has no position in any of the 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 Scott Phillips.

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