Apollo's 885p cash proposal for Bodycote Group (LSE:BOY), the FTSE 250 thermal processing services group, does not fully recognise the growth opportunities in the business, according to analysts at Deutsche Bank and Peel Hunt.
The US private equity firm's approach, which values Bodycote at approximately £1.52 billion, was confirmed last Friday following what the company said had been a number of previous proposals.
Shareholders would receive 885p per share in cash plus the proposed final dividend of 16.1p for the 2025 financial year, representing a premium of roughly 27% to the prior closing price.
Peel Hunt has responded by raising its target price from 850p to 1,000p, noting that the possible offer is only marginally ahead of its previous target and does not reflect the near or medium-term opportunity.
On Peel's forecasts, the 885p proposal values Bodycote at 9.2 times estimated 2026 EBITDA and 8.8 times 2027, after adjusting for the ongoing £80 million share buyback programme. At 1,000p and assuming no further buyback, the multiple would be 10.1 times 2026 EBITDA, which the broker says does not feel particularly full.
Its EBITA estimates of £121.5 million for 2026 and £131 million for 2027 are broadly in line with company-derived consensus.
Deutsche Bank, which carries a buy rating and 835p target, argues the proposal does not represent a knockout bid given competitive dynamics in the sector.
At the heart of Deutsche#s case is Bodycote's aerospace and defence division, which analyst Thomas Elgar estimates will contribute around 50% of group EBIT in 2026, up from approximately 35% in 2023. The adjacent opportunity in industrial gas turbines adds a further high-growth dimension.
The margin expansion expected from both the Optimise cost reduction programme and the Perform productivity initiative is a further factor that Peel Hunt believes the possible offer fails to capture.
Peel Hunt also flags the potential for competing interest, noting that sector peers Oerlikon and Aalberts could bring substantial synergies, while private equity has been increasingly active at lower levels in US heat treatment.
An opportunity to acquire the global market leader in a consolidating growth market is a compelling proposition, the broker argues.
Bodycote has been reshaping its portfolio, disposing of ten non-core automotive and industrial sites in France in late 2025 and acquiring aerospace-focused Spectrum Thermal Processing in Rhode Island for $8 million in January.
Aerospace and defence revenue grew 14% in the second half of 2025, and Bodycote has guided for continued strong demand from A&D and industrial gas turbines in 2026.
Under UK takeover rules, Apollo has until 19 June to either announce a firm intention to make an offer or walk away.
In afternoon trading, the shares were up a penny at 832.5p.