The takeover of M&C Saatchi PLC (AIM:SAA) by Next Fifteen Communications Group PLC (AIM:NFC) is “far from a done deal” reckons broker Peel Hunt.
The Saatchi board recommended a 247.2p-per-share cash and shares offer from Next 15 after rejecting a hostile 207p offer from AdvancedAdvT Ltd (LSE:ADVT) just days earlier.
While Advt, which is led by Vin Murria, has announced that it will not be increasing its offer, it also suggested that Next 15’s bid is too low and does not reflect the full potential of the unlocked synergies to M&C shareholders.
Murria and Advt, who own 22.3% of M&C Saatchi shares, said on Monday they are considering their options.
“Due to the timing and the magnitude of the transaction, we believe it is not without risks,” said Peel Hunt analyst Jessica Pok.
“However, Next 15’s management has a strong track record of successful acquisitions. We believe M&C unlocks a number of opportunities for the group, if executed well and a strong strategy is put in place – Next 15 could evolve into a bigger and better player in the future.”
The benefits to Next 15 are that the two groups would be complementary, as they operate in different spaces within the marketing world, as well as adding new clients, strengthening its geographic offer and some cost ‘synergies’.
Next 15’s offer is currently structured as a scheme, which means it requires 75% of those voting to be in favour of the deal.
“Therefore, in theory the transaction can go through without Advt’s support, however the turnout of voters must be exceptionally high,” said the analyst.
Peel Hunt upgraded its recommendation of Next 15 to 'buy' from 'add' based on its target price of 1,580p, with the upside potential at roughly 19% based on the last closing price of 1,228p.