Shore Capital analysts have said a reported bid for Chemring Group (LSE:CHG) is at least 100p too low given the defence firm's “exceptional growth opportunity”.
Chemring had been approached by Bain Capital over a 390p per share bid in recent weeks, Sky News reported on Monday.
Shore Cap felt Chemring’s fair value sat nearer 490p, leaving an “adequate” take-private bid needing to exceed 500p.
Chemring was eyeing “compelling” opportunities across both its Energetics (explosives and propellants) and Roke (science and engineering) arms, Shore Cap said.
Speculation around higher European defence spending “more than justified” a “high” 4% terminal growth rate in the meantime, according to analysts.
“If a bid for 390p becomes official, we would encourage shareholders to reject it,” Shore Cap added.
Shares were up 1.3% at 378.5p on Tuesday.