Shares in Berendsen rose by a quarter to 1,076p – about a pound shy of the value of Elis’s proposed offer - as news of the bid approach broke.
Elis has offered £4.40 in cash and 0.426 Elis shares for every Berendsen share, which based on last night’s exchange rates and closing share price of Elis values Berendsen at around £2.05bn, or 1,173p a share.
Elis made its first approach to Berendsen on April 28, offering the equivalent of 1,100p a share, and after being rebuffed by the Berendsen board it bumped that up. The new conditional terms were still not enough to bring Berendsen to the table, so the French company opted to go publich with its proposal.
“A combination of Berendsen and Elis offers a compelling opportunity to create a pan-European textile and facility services group, combining Berendsen's competitive position in Northern Europe with Elis's strengths in the rest of Europe and a number of high-growth emerging markets,” Elis said.
That argument did not wash with the Berendsen board, every member of which has judged that the terms significantly undervalue Berendsen and its prospects.
The UK firm, which has become a serial profit warning generator in the last year, said it saw no basis for any further discussions with Elis.
Berendsen presented its turnaround strategy in March of this year and the board, as one might expect, said it is highly confident that the delivery of this strategy will generate significant future shareholder value.
“The company has already begun to see some of the expected benefits from the implementation of the strategy,” Berendsen claimed.
The company is currently trying to make up for years of under-investment by pumping £450mln of capital into its operation.
“As previously stated, Berendsen is targeting a pre-tax return of at least 15% on the £300 million of strategic capital to be invested on conversion of existing plants and building of new plants,” the company said in what is likely to be the first salvo in a rear-guard bid defence.
As is so often the case, then, it all boils down to jam today or the prospect of more jam tomorrow.
Given the two recent profit warnings by Berendsen, there is some merit in the UK company’s view that the bid is opportunistic.
"This preliminary and conditional proposal very significantly undervalues Berendsen, is highly opportunistic and does not reflect the inherent value of our business,” said Iain Ferguson, chairman of Berendsen.
“As an independent company, the entire value of delivery on Berendsen's strategy will accrue to our shareholders; under Elis's proposal that value upside will be materially diluted. The proposed combination would result in substantial risk: it increases execution risk against the existing strategy and introduces material integration risk,” he added.
“Berendsen has a strong team to deliver against our strategy, so we strongly advise that shareholders take no action," Ferguson concluded.