Shares in Ricardo PLC (LSE:RCDO) surged 25% in early trading after the 109-year-old British engineering group agreed to a £281 million takeover by Canadian consultancy WSP Global, and highlighted a nifty bit of investing by activist Science Group PLC (AIM:SAG)
The deal, priced at 430p per share, represents a 28% premium to Tuesday’s close and a 69% premium to Ricardo’s average price over the past three months.
WSP had already acquired just under 20% of the company from existing shareholder Science Group, which built a stake between February and May.
Ricardo’s board backed the offer, calling it fair and in shareholders’ best interests. The company, headquartered in Shoreham-on-Sea, employs around 2,700 staff across more than 20 countries and is best known for its work in engine design and emissions control.
WSP, which used to be a UK-listed support services group before Canadian rival Genivar bought it in 2012 as a way of getting a foothold in the UK, plans to streamline Ricardo’s operations, merging its automotive and performance units, and will focus on expanding its environmental and energy transition portfolio. The acquisition is expected to complete later this year.
Investment bank Stifel reckons a counter-bid is "unlikely" given WSP's current shareholding, adding that investors will "view this [the bid] as a positive outcome for Ricardo's shareholders given recent challenges".
Russ Mould, head of investment at AJ Bell, agreed Ricardo looked "an ideal fit" for WSP but also highlighted the "blinding deal" by Science Group to sell its shares to WSP.
Science Group flipped its stake for a £53.5 million profit, which he says is "not bad for a business that’s only worth £234 million".
"Science Group had rattled the cage and got in a public spat with Ricardo, accusing it of poor operating performance and ineffective governance," he said, a campaign that put it "on the radar as an activist investor to watch closely".
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