CareTech, which offers social care services, has been in talks with Cambian since July as it seeks to expand its child care business.
It is offering cash-and-stock or all cash for Cambian. The cash and stock deal includes 0.267 new shares and 100p in cash for each Cambian share held, representing a total value of 200p per share or £372mln.
Under the all-cash offer, CareTech will pay 190p for each Cambian share. Cambian’s closing share price on Wednesday was 190.5p, which values the group at £353mln.
Bid lower than first offer
The latest proposals are below CareTech’s first bid in July, which was 220p per share in cash and stock or 200p per share in full cash.
CareTech said it expects the deal to create pre-tax cost synergies of about £6mln per year by 2021.
“The financial rationale for the Transaction is compelling in its potential to generate value for both CareTech shareholders and Cambian shareholders,” said CareTech chairman Farouq Sheikh.
“At the same time, the larger size of the enlarged group means that more funds will be made available to the CareTech Charitable Foundation to accelerate its important work in giving back to the most disadvantaged communities.”
Shares in Cambian rose 1.8% to 194p in mid-morning trading while CareTech edged up 0.7% to 377p.
Liberum sees benefits of enlarged group but downgrades Cambian
Liberum downgraded Cambian to a 'hold' rating from 'buy' and cut its target price to 200p from 238p.
“In sum, while we clearly believe the value of Cambian is meaningfully greater (previous target price £2.38) than that agreed today, we expect this deal to be completed (subjected to competition authority approval) and can see the attractions of the new combined entity,” said Liberum.