Alent PLC Jumps Over 40% On £1.4bn Offer From Platform Specialty Products Corp

Platform Specialty Products Corp (NYSE: PAH) has made a £1.4bn offer for Alent PLC (LON: ALNT)

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Alent (LSE: ALNT) has fallen prey to Platform Specialty Products Corp after the US group made a 503p per share cash offer for FTSE 250 chemicals company.

Platform Specialty is a chemicals industry consolidation vehicle — a cash shell, in other words — which is going around acquiring undervalued businesses in the chemical industry, and rolling them into one group. 

The industry consolidator is willing to pay a hefty premium for its targets. Today’s offer for Alent is 49% above Alent’s Friday closing price of 338p. Alent’s shareholders will have the option to receive to receive shares in the new company in lieu of cash, up to 21.9% of the new entity’s issued share capital. 

And taking a portion of the offer in stock might be a sensible decision for Alent’s shareholders. Platform Specialty is well placed for long-term growth. 

Cost saving synergies

As a standalone company, City analysts had expected Alent to report earnings per share growth of around 10% per annum during 2016 and again in 2017. A combination of cost savings, revenue growth and margin expansion were expected to help Alent to grow pre-tax profit by 44% during the next two years.

As part of the larger Platform Specialty group, Alent should be able to achieve significant cost efficiencies, widening margins further. Platform reckons the combined group can achieve annual pre-tax cost synergies of at least $50m.

What’s more, Platform already owns MacDermid Inc., a specialty chemicals company that is a direct competitor of Alent’s US-based Enthone division that produces coatings for mobile phones and cars.

So, there’s more to this deal than just simple cost-saving synergies. Platform Specialty is removing a key competitor from the market and increasing production simultaneously.  However, as the deal will create a company that has a certain amount of control over key markets, it will require antitrust approval.

Rapid growth

Platform Specialty’s strategy is to buy companies that are leaders in niche businesses and require little capital investment. These companies usually generate a large amount of cash, which can be used for future bolt-on acquisitions to further boost growth. 

Indeed, over the past 12 months Platform Specialty has been on an acquisition spree, rolling up several smaller peers into its group structure.

This bolt-on strategy is set to achieve results. According to Wall Street analysts, before today’s announcement Platform Specialty’s earnings per share were on track to jump 83% during 2016 and 24% during 2017. The acquisition of Alent should only boost this growth.

Using Wall Street estimates, Platform Specialty’s shares that trade on the New York Stock Exchange are currently trading at a 2017 P/E of 11.7. 

The bottom line

All in all, Platform Specialty’s offer to buy Alent looks to be a great deal for shareholders. Shareholders are receiving a hefty premium for their shares, and the enlarged Platform Specialty will be well placed to generate rapid growth in the short-term as synergies flow through, and the company dominates key markets. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »