Premier Farnell rockets on Daetwyler deal

14th Jun 2016 07:04

(ShareCast News) - Shares in Premier Farnell rocketed on Tuesday after the electronic component distributor agreed to be bought by Swiss-based Daetwyler Holding AG for 165p per share in cash.The price represents a premium of around 51% to Premier's closing price on Monday and gives an enterprise value of £792m.Premier said its directors intend to unanimously recommend that shareholders vote in favour of the deal.Chief executive officer Jos Opdeweegh said: "I am pleased we have reached an agreement with Daetwyler Holding Inc on the terms of a recommended offer for Premier Farnell. I believe the combination of the two companies represents a strong strategic fit and is highly attractive for customers, shareholders and colleagues."Meanwhile, Daetwyler said: "The combination of Premier Farnell and Daetwyler creates a leader in high-service distribution of electronic components and in doing so realises significant value for the shareholders of both companies."The companies expect to achieve total earnings before interest, taxes, depreciation and amortisation run-rate synergies of CHF50m-CHF70m by the end of 2019. Also on Tuesday, Premier Farnell put out its first quarter results, which showed revenue of £247.2m for the period from 1 February to 1 May, up from £240.5m the previous year.Chief executive officer Jos Opdeweegh said: "The sales trends of 2015/16 continued into the first quarter of this financial year, with strength in Continental Europe and Asia Pacific and difficult trading conditions in North America and UK. "We remain on track to make progress in this financial year, as we increase our operational efficiency and relevance to customers, and we implement the outcomes of our operational review."RBC Capital Markets downgraded the stock to 'sector perform' from 'outperform' but lifted the target price to 165p from 155p following the deal announcement."Given our view that this is a fair price, we downgrade to sector perform and increase our target price to 165p, in line with the offer."RBC said that given weak trading, historic issues, management change and gross margin pressures, this is a good price, but it wouldn't rule out a counterbid.The bank said the new rating reflects its belief that the 165p per share offer from Daetwyler will go through.At 1222 BST, Premier Farnell shares were up 50% to 164.10p.