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Kentz's latest figures will fail to dispel takeover talk Kentz's latest figures will fail to dispel takeover talk
(25 days later)
Kentz, the Irish contractor to the oil, gas and mining industries, started on the back foot when Amec, a practised acquisition machine, came knocking last week.Kentz, the Irish contractor to the oil, gas and mining industries, started on the back foot when Amec, a practised acquisition machine, came knocking last week.
The problem was simple: the Malaysian investors who had successfully rescued Kentz in the 1990s had sold half their 26% stake a year ago, at 430p a share. Since one of the investors is also Kentz's chairman, there was a credibility issue in resisting Amec's indicative offer at 565p-580p, or about £700m.The problem was simple: the Malaysian investors who had successfully rescued Kentz in the 1990s had sold half their 26% stake a year ago, at 430p a share. Since one of the investors is also Kentz's chairman, there was a credibility issue in resisting Amec's indicative offer at 565p-580p, or about £700m.
A lot can happen in a year to change a company's value, of course. But if Kentz is serious about putting up a stout defence, it may have to produce stronger stuff than was contained in yesterday's interim numbers. Revenues were up 2%, to $775m, and reported pre-tax profits were 3% higher, at $52.7m. That was all in line with analysts' forecasts but was still lacking a certain transformational quality.A lot can happen in a year to change a company's value, of course. But if Kentz is serious about putting up a stout defence, it may have to produce stronger stuff than was contained in yesterday's interim numbers. Revenues were up 2%, to $775m, and reported pre-tax profits were 3% higher, at $52.7m. That was all in line with analysts' forecasts but was still lacking a certain transformational quality.
True, the backlog of orders – up 12%, to $2.8bn – looks solid enough. Kentz is also chatting about a busy period for bidding for new work, and expressed its confidence by pushing the half-year dividend up 20%. All the same, there were few specific gems to encourage long-standing shareholders to stay loyal.True, the backlog of orders – up 12%, to $2.8bn – looks solid enough. Kentz is also chatting about a busy period for bidding for new work, and expressed its confidence by pushing the half-year dividend up 20%. All the same, there were few specific gems to encourage long-standing shareholders to stay loyal.
They may reflect that if the bid buzz evaporates Kentz may once again be viewed as a well-run but ultimately lower-margin contractor whose shares traditionally trade at a discount to larger, engineering-focused rivals.They may reflect that if the bid buzz evaporates Kentz may once again be viewed as a well-run but ultimately lower-margin contractor whose shares traditionally trade at a discount to larger, engineering-focused rivals.
We shall see. Amec clearly hasn't offered its best shot yet, and it would have to go well above 600p to persuade Kentz to open its books, especially if the German M+W Group is still sniffing. But the share price, steady at 565p, is saying Kentz has not killed the takeover talk yet.We shall see. Amec clearly hasn't offered its best shot yet, and it would have to go well above 600p to persuade Kentz to open its books, especially if the German M+W Group is still sniffing. But the share price, steady at 565p, is saying Kentz has not killed the takeover talk yet.
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