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Renishaw rallies on reports of interest from Danaher, Hexagon
29th Mar 2021 11:15
(Sharecast News) - Renishaw shares rallied after Bloomberg reported late on Friday that the engineer, which has put itself up for sale, is attracting initial interest from Danaher and Swedish rival Hexagon AB.
Citing people familiar with the matter, Bloomberg said US medical equipment maker Danaher is considering teaming up with Fortive Corp, the industrial company it spun off in 2016, to bid for Renishaw and then split up the business.
Renishaw may also approach rival engineering and precision measurement companies such as Ametek, Mettler-Toledo International, Japan's Keyence and France's Schneider Electric, according to Bloomberg's sources.
It was also understood that a small number of private equity firms have separately shown interest.
Renishaw announced early in March that it was putting itself up for sale as its founders look to sell their stake. The company said at the time that executive chairman Sir David McMurtry and non-executive deputy chairman John Deer would sell their shareholdings in Renishaw, which together make up around 53% of the group.
Renishaw said they had expressed a preference for the disposal of their entire combined shareholding.
At 1245 BST, the shares were up 4.6% at 6,275p.
Numis said: "Both names would make sense from our perspective.
"The debate remains as to whether any bid that may materialise will be at a premium to the current share price given the stipulation for 'a buyer who will respect the unique heritage and culture of the business', current high valuation of the shares (Jun FY22E EV/sales 7.1x our current estimates) and the need for the founders to reach an agreement.
"The strong trading update on Friday saw the shares only up 3.9% higher on the day. There is no doubt in our mind that the business could be run more profitably (although we have been surprised by the extent of the recent cost cutting programme). A gross margin of over 65% pre R&D costs suggests an EBITA margin of circa 30% should be achievable (although what deal obligations may a potential acquirer be required to agree to?).
"Taking our current FY23E sales of £616m and applying a 30% margin would suggest EBITA of circa £185m. This would still equate to an EV/EBITA of just over 20x at the current share price."
On Friday, Renishaw upgraded its full-year guidance as it pointed to "good momentum" in the business. In a brief update for the year to 30 June 2021, the company highlighted "particularly strong" demand in the semiconductor capital equipment and consumer electronics markets.
"With a record order book, we currently anticipate that revenue for the full year will be between £540m and £570m, and adjusted profit before tax will be between £105m and £125m," it said.
In its half-year report in February, Renishaw had said it was expecting revenue of between £515m and £545m and profit of £85m to £105m.
Citing people familiar with the matter, Bloomberg said US medical equipment maker Danaher is considering teaming up with Fortive Corp, the industrial company it spun off in 2016, to bid for Renishaw and then split up the business.
Renishaw may also approach rival engineering and precision measurement companies such as Ametek, Mettler-Toledo International, Japan's Keyence and France's Schneider Electric, according to Bloomberg's sources.
It was also understood that a small number of private equity firms have separately shown interest.
Renishaw announced early in March that it was putting itself up for sale as its founders look to sell their stake. The company said at the time that executive chairman Sir David McMurtry and non-executive deputy chairman John Deer would sell their shareholdings in Renishaw, which together make up around 53% of the group.
Renishaw said they had expressed a preference for the disposal of their entire combined shareholding.
At 1245 BST, the shares were up 4.6% at 6,275p.
Numis said: "Both names would make sense from our perspective.
"The debate remains as to whether any bid that may materialise will be at a premium to the current share price given the stipulation for 'a buyer who will respect the unique heritage and culture of the business', current high valuation of the shares (Jun FY22E EV/sales 7.1x our current estimates) and the need for the founders to reach an agreement.
"The strong trading update on Friday saw the shares only up 3.9% higher on the day. There is no doubt in our mind that the business could be run more profitably (although we have been surprised by the extent of the recent cost cutting programme). A gross margin of over 65% pre R&D costs suggests an EBITA margin of circa 30% should be achievable (although what deal obligations may a potential acquirer be required to agree to?).
"Taking our current FY23E sales of £616m and applying a 30% margin would suggest EBITA of circa £185m. This would still equate to an EV/EBITA of just over 20x at the current share price."
On Friday, Renishaw upgraded its full-year guidance as it pointed to "good momentum" in the business. In a brief update for the year to 30 June 2021, the company highlighted "particularly strong" demand in the semiconductor capital equipment and consumer electronics markets.
"With a record order book, we currently anticipate that revenue for the full year will be between £540m and £570m, and adjusted profit before tax will be between £105m and £125m," it said.
In its half-year report in February, Renishaw had said it was expecting revenue of between £515m and £545m and profit of £85m to £105m.