The UK market continues to shrink with the announcement Rotork (LON:ROR) has agreed a cash offer from ABB (SWX:ABBN). The Swiss engineering giant has agreed to pay 506p per share, including a 3p dividend, representing a 73% premium to last night’s close.
‘Highly attractive business’
ABB, which specialises in automation and robotics, describes the UK company as ‘a highly attractive business’. Rotork produces intelligent flow control solutions and electric actuators, making it a good strategic fit with ABB’s automation portfolio.
Adding Rotork’s offering strengthens ABB’s position in automating ‘large and complex industrial and infrastructure applications’, the firm says. That doesn’t just mean factories, it suggests ABB sees applications in higher-value applications such as data centres.
The Swiss firm says Rotork will add 12% to its automation revenue and 3% to group revenue based on FY25 figures. The deal is also expected to be earnings accretive in the second year after completion.
Gooch & Hoousego also succumbs
Photonics engineering group Gooch & Housego (LON:GHH) has also agreed an offer this morning, from US private equity investor Arlington Capital Partners. The offer values G&H at £12.30 in cash plus a 4.9p/share dividend, which represents a 40.7% premium to last night’s close.
ACP says it has ‘long admired’ G&H and has been impressed by its reputation for quality, product expertise, technical performance and innovation. The US firm has a track record of investing in high-quality engineering businesses serving the aerospace, defence and life sciences sectors. As well as financial backing and access to capital, it has extensive industry knowledge and commercial relationships.
We can barely keep up with the pace of takeovers in the UK mid-cap market at the moment. The list of companies being taken out, either by industry insiders or private capital, grows longer by the day.
We’re impressed by ABB’s offer of 506p, though, given the all-time closing high in Rotork back in March was only 386p. If you’re going to make a bid, go big or go home is the message.
Too many acquirers – Castlelake springs to mind, for starters – try to low-ball their offers and then nudge them up. That’s not great for investors, and as Apollo has shown it leaves the door open to a higher counter-offer.
For investors in Rotork and G&H, the question is where do they go now? The good news is there is still a decent pool of high-quality UK mid-cap engineering firms trading at attractive multiples.
Read the Rotork press release here: https://www.rotork.com/en/investors
