I am monitoring the share price of AGA Rangemaster (LSE: AGA) today following Whirlpool‘s latest announcement… I’d have never expected a bidding war, but this is the most likely scenario right now!
Elsewhere, the shares of Latchways (LSE: LTC) and Exillon Energy (LSE: EXI) have also caught my attention today. They are up 48% and 7.7%, respectively, in a plunging market, with the FTSE 100 down 2.6% at the time of writing.
Aga Rangemaster On The Up
This is great news for shareholders, but how much risk does the trade carry now?
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When initial takeover news emerged in mid-June, AGA stock surged over 30%; back then, it announced that it was holding discussions with US-based Middleby, which offered 185p in cash for each AGA share soon after, valuing the equity of the target at about £129m.
Whirlpool may or may not make a formal offer, yet the stock of AGA currently trades at 203p and could seriously offer more value to shareholders. Whirlpool is expanding abroad, and AGA would be just a bolt-on deal, so its suitor could well overpay for it.
Frankly, these situations are ideal for opportunistic traders, but I am after long-term value so I’d likely give it a pass, although more upside is possible.
Goodbye Latchways
Latchways, a maker of protection systems, said today that it had agreed to be bought by US-based MSA Safety for an enterprise value of £114m.
Under the terms of the acquisition, Latchways shareholders will receive 1,100p in cash for each share they own, which implies a 53% premium over Latchways’ share price on Friday.
Its share price’s 52-week range is between 705p and 1,068p, and it appears clear that its shareholders are being offered a fair deal. The group has never recovered from the plunge in its valuation at the end of 2014, which came in the wake of a profit warning last autumn.
I’d say that this is the best outcome for shareholders, given that the outlook for many of its end markets is still problematic.
Exillon Energy: Too Risky?
A risky bet (as its price to book value indicates), the stock of Exillon Energy is perhaps the most appealing investment of the three, having risen 7.7% today following the release of a trading update today that showed:
• Net profit down by 45% to $13.2m ($23.8m in H1 2014);
• Earnings before interests, taxes, depreciation and amortisation down by 40% to $30.4m ($50.7m in H1 2014);
• Production down by 7%, with the average production for H1 2015 equivalent to 16,643 bpd.
Operating costs have fallen, but negative working capital should be closely monitored, although capex requirements are covered by its cash balances over the short term.
“As at 30 June 2015, the outstanding debt had reduced to $54m, as a result of scheduled repayments of principal. Our net cash position was $5.2m,” Exillon also pointed out.
In short, it could have been much worse: its stock now trades at 108p, or some 20% above the 52-week low of 90p of last week. I am tempted!
Oil prices had risen almost 20% in less than a week but they are down over 3% today on the back of weak factory data from China, which testifies to a highly volatile market environment. I am still convinced that Brent crude oil will trade around $80 per barrel by the end of the year following a less aggressive production policy by the OPEC — well, to me at least, this will be what it takes to invest in Exillon and other similar oil players!
