Broker snap: Serco plays down speculation

24th Jan 2011 12:37

Outsourcing giant Serco has confirmed that it is not in talks over acquiring US group SRA International, much to the disappointment of Panmure Gordon, which described it as a missed opportunity for the group to become the "biggest foreign company providing services to the US government."The Telegraph reported that Serco had made an initial approach for SRA on Saturday for $2bn, but the group played down speculation in a statement issued Monday. However, "BAE could also be interested in this asset, which may have change the competitive landscape in the US for Serco, if proved successful," the broker said.SRA provides technology and strategic consultancy to the US government and operates in 50 locations around the world. "There is growing evidence that the US government is outsourcing many of its roles so the revenue synergies would huge," but "this would have been Serco's largest acquisition by some way therefore execution risk would also be high."Panmure maintains its 'hold' recommendation and 556p target price for Serco ahead of its results on 2 March "on the basis that we see a slowing organic growth profile during 2011, and prefer Capita ('buy', target price: 805p) and Babcock ('buy', target price: 750p) in the sub-sector at present."