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Sepura may face fresh takeover bid after warning - broker

Last updated: 11:00 17 Sep 2016 BST, First published: 11:50 15 Sep 2016 BST

A building worker using a walkie-talkie
Sepura makes walkie-talkies for use in industries such as energy and construction

Digital radio supplier Sepura Plc (LON:SEPU) may face a fresh takeover bid after it warned it may breach its banking covenants, a broker said.

Sepura said in late July that it had received a preliminary takeover approach from an unidentified third party, although the potential bidder later said it did not plan to make an offer.

Liberum Capital said it believed bidders could come back in after the company said on Wednesday that it may have to ask its lenders to waive certain covenants from next March.

The broker’s Ben Bourne said: “The current position of weakness is likely to attract other potential trade and private equity interest.”

Shares in Sepura lost more than half their value on Wednesday after news of the potential covenant breach and a revelation that its chief executive was taking immediate sick leave.

Sepura, which makes walkie-talkies for industrial uses, blamed the problems on a fall in orders in the last few months as customers held off from replacing or upgrading equipment due to budget pressures.

Major contract awards in the group’s systems business had also faced delays, meaning it would fail to hit its adjusted earnings target.

Sepura said it had enough cash for its expected needs, but the lower-than-expected revenues may force it to talk to lenders.

It added that it was looking to cut costs further and would update the market as soon as it could.

The shares took another tumble on Thursday, dropping 0.37p, or more than 3%, to 11.63p.

Liberum’s Bourne said July's takeover approach had aroused suspicions of other interest, given Sepura’s large installed base in terrestrial trunked radio - a professional mobile radio and two-way transceiver specification – globally and in North America in particular.

Bourne said Liberum was placing its estimates, recommendation and target price under review.

“Following a preliminary approach announced in July, their predicament may attract other potential acquirers,” he said.

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