The Motley Fool

Today’s Mid-Cap Losers: UBM Plc, Hardy Oil & Gas plc And Lancashire Holdings Limited

UBM (LSE: UBM) is leading the market lower today. At time of writing the company’s shares have fallen by around 21%, although this decline is the result of a discounted rights issue. The proceeds of the rights issue will be used to fund the acquisition of Advanstar Communications for a total consideration of £565m. 

The acquisition of Advanstar looks to be a great fit for UBM. The deal will make UBM the market leader in fashion industry events in the US, as well as the number one events business in the US by revenue. Further, the acquisition is expected to be immediately earnings accretive, even pre-synergies and UBM will be able to use its own tax losses to boost Advanstar’s benefits to the business. 

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Unfortunately, due to the rights issues and nature of the Advanstar acquisition, it’s difficult to try and put a valuation on UBM at present. Nevertheless, it’s easy to see that the deal will be a game changer for UBM and the company’s growth will receive a significant boost. 

Special dividend 

Chasing UBM lower is Lancashire Holdings (LSE: LRE), which has fallen just under 13% at time of writing. 

Just like UBM, Lancashire is heading lower after a corporate development — the company is trading ex-special-dividend. Management announced a $1.20, or 76p per share, special dividend alongside third-quarter results. The payout is equal to a yield of around 12% and will be paid on the 19th of December. 

This is not the first time Lancashire has issued such a hefty payout. The company has a dividend policy of paying out all surplus capital to investors, a policy that has won the praise of revered fund manager, Neil Woodford. Annual special dividends are common, and since coming to market during 2006, including dividends, Lancashire has returned 422%, excluding today’s special payout.

City analysts are expecting this trend to continue through 2015 with a dividend yield of 8.8% pencilled in. 

Slow progress

Over in the oil and gas sector, Hardy Oil & Gas (LSE: HDY) is falling today, after the company issued its results for the six months ended 30 September 2014.

Hardy reported a comprehensive loss of $1.4 million for the period, compared to a loss of $3.1 million for the same period in 2013. The narrowed loss was a result of forex and other onetime charges for the comparable period. Hardy exited the period with cash and short-term investments of $22.9m, which gives it plenty of headroom to finance development plans. 

However, the company’s development plans are moving at a snail’s pace, with little action over the past six months. Key to Hardy’s future is the development of the PY-3 well, specifically, the company is looking to secure approval from the Government of India over the next few months to restart production from this asset during 2015.

But until PY-3 is allowed to restart, Hardy’s outlook is cloudy. Some analysts have begun to speculate that the company could be forced to raise additional funds, if the asset is not allowed to restart production. The lack of progress seems to be frustrating investors. 

Still, Hardy has a portfolio of attractive assets aside from PY-3 and if it can unlock value from these, analysts believe that the company’s share price could be in for a significant re-rating, although this is unlikely if the company runs out of cash.

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Rupert Hargreaves owns shares of Lancashire Holdings. The Motley Fool UK has recommended UBM. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.