Shares of embattled insurance outsourcer Quindell (LSE: QPP) are surging this morning on takeover rumours.
These rumours stem from a report published yesterday in The Sunday Times. The report claimed that Australia’s largest law firm, Slater & Gordon, is on the verge of making an offer for Quindell’s legal services division.
According to reports, Slater & Gordon — an Australian law firm with interests around the world — is contemplating a £640m cash offer for Quindell’s legal services division, which is equivalent to around 145p per share.
What’s more, as part of the deal, Slater & Gordon is expected to pay Quindell 50% of receipts from noise-induced hearing loss cases being investigated by the division.
These terms value Quindell’s legal services division at around £900m. With the £640m upfront cash payment complemented by receipts from hearing loss cases of between £100m and £300m over the next three years.
According to sources, Slater & Gordon has already completed its due diligence on Quindell. It is expected that the deal will be officially announced before 23 March, when the Australian group’s “exclusivity” agreement runs out.
Could it be different this time?
Quindell is no stranger to takeover speculation. Ever since the group embarked on a turnaround plan, after the departure of former chief executive Rob Terry in November of last year, there has been an almost continual stream of rumours surrounding the company.
And it remains to be seen if this latest rumour has any truth behind it. At present, there is little to suggest that Slater & Gordon will make an offer for any part of Quindell. The two groups have been in discussions for some time and so far, Slater & Gordon has not expressed any concrete interest in all, or part of Quindell. Quindell’s management had to reassure the market at the end of February that negotiations between the two groups were still in progress, amid speculation that the talks were starting to unravel.
Nevertheless, as the saying goes “there’s no smoke without fire” and this takeover rumour could have some truth behind it. Personally, I’m always sceptical of any takeover speculation — more often than not, the speculation is just that, speculation, and nine times out of ten, no deal will be announced.
Unfortunately, any offer for all or part of Quindell is likely to be below the company’s all-time high of 626p reached at the beginning of 2014, just before the company came under the scrutiny of short sellers.
