Forth Ports suitor urged to up its bid

Published on Wednesday 24 March 2010 20:06

PRESSURE last night mounted on the consortium looking to swallow Forth Ports to up its bid by as much as £150 million.

Analysts raised the bar for Northstream, which is in talks to buy out the Edinburgh ports and property group, arguing Forth Ports was now worth some 776m – against the last bid approach of 612m, which was rejected.

Investment bank Nomura revised up its recommendations on the value of the group to between 16.50 and 17 a share, compared to a previous recommended high by other analysts of 15.

The Forth Ports' board expect the new price will give pause for thought to Northstream, a consortium of investors who met Forth to discuss terms this week.

The ports operator rejected two bids from the consortium in January, which topped at 13.40 a share.

But industry sources believe that Northstream will reject the 17-a-share valuation and is likely to stick to its guns at 13.40. "This is so far away from reality it really won't be taken seriously," said one source.

The dispute on price centres on how the firm is evaluated after Forth Ports released its annual results on Monday. Mark McVicar at Nomura said the value of the ports business was, at 12.5 times underlying profits (Ebitda – or earnings before interest, tax, depreciation and amortisation), "very straight forward" and less than other similar ports businesses that have been sold in the past three to five years, including AB Ports and Clydeport.

More difficult to value is Forth Ports' land which has been hit by the economic downturn. Nomura's 142m estimate of the value of the port owner's land holding was provided by valuer DTZ. McVicar argued this value was low and did not include more than 250 acres of land owned by Forth Ports at Granton, Western Harbour, Tilbury and Leith Docks. "That is an absolutely minimum valuation," said McVicar.

He said the value of Leith shopping centre Ocean Terminal – which has fallen from a high of 140m to about 85m – nevertheless shows property prices are recovering.

"This suggests we are now beyond the low point at the end of 2008. That is what shareholders have to think about."

But an industry insider has criticised the use of the 142m valuation in the 17-a-share bid. He argued the 85m value of Ocean Terminal does not take into consideration the 67.7m debt on the property, owed to Lloyds Banking Group after Forth Ports bought out its stake in the shopping mall in December for 2m.

The insider, who did not wish to be named, claimed the 142m figure was likely to be closer to 40m, as property for Leith Docks and Grangemouth included in the valuation figure has already been accounted for in the value of the ports business. A new bid is expected over the coming weeks.