Bidding battle looms as Kentz turns down takeover

A BIDDING war is brewing for engineering firm Kentz after it rejected two offers from rival suitors today.

Ichthys liquid natural gas project at Darwin, Australia. Picture: Contributed
Ichthys liquid natural gas project at Darwin, Australia. Picture: Contributed

The firm said takeover approaches from larger London-listed rival Amec and Germany’s M+W Group both undervalued the company.

The higher offer, from Amec, was for between 565p and 580p a share, valuing Kentz at around £680 million.

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Kentz responded: “The board reviewed this proposal in conjunction with its advisers and concluded that it undervalued the company and therefore unanimously rejected the approach.”

The firm, which traces its origins to an Irish electrical company but is now headquartered on Jersey, said it has “a strong and consistent track record of revenue and earnings growth” since its 2008 flotation, as well as “strong growth prospects given its substantial order backlog, prospective bidding pipeline and robust balance sheet”.

The company’s growth has seen it elevated to the FTSE 250, and recent contract awards include building parts of the Nacala rail and port project in Mozambique and the Ichthys liquid natural gas project at Darwin, in Australia.

The firm said that it has a clear and realisable strategy to create further shareholder value as a standalone entity.

Shares in the firm shot up more than 20 per cent following the news, taking them beyond Amec’s offer price. The company has already seen its value grow since Amec made an earlier approach on 11 July. Prior to that, shares had traded around the 400p mark.

Analysts say Kentz’s global reach and construction focus make it an attractive target for engineering companies looking to expand their service offerings.

David Thomas, analyst at Credit Suisse, said: “Now that Kentz has emerged as a target we think a competitive bidding war could evolve.”

Amec has previously said it was looking to make acquisitions in the oil and gas sector, adding that if no deals were forthcoming it would consider a cash return for shareholders in the fourth quarter. However, Thomas said Amec chief executive Samir Brikho prefers to do his deals behind closed doors, so it may not take part in the kind of competitive bidding he thinks could ensue for Kentz.

As well as M+W Group, Canadian rival SNC-Lavalin is also reported to have shown an interest in the firm.

The offers for Kentz follow another takeover battle in the sector, which saw construction group Kier swallow infrastructure and maintenance company May Gurney for £221m, trumping a rival offer from Costain. The acquisition extended Kier’s business into Scotland.

Kentz, which has more than 14,500 employees in 30 countries and annual revenues of around £1 billion, is itself looking to expand. Chief executive Christian Brown said last month that the group was looking for engineering acquisitions of its own, and had “trawled the globe” looking for suitable companies. He said he would be disappointed if a deal was not done this year.