Ashcourt Rowan PLC Surges Over 50% After Agreeing £97m Takeover By Towry Finance

Ashcourt Rowan PLC (LON: ARP) is today’s biggest climber after accepting a takeover bid.

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.

Shares in financial adviser Ashcourt Rowan (LSE: ARP) have today risen by an incredible 55% at the time of writing after the company’s board unanimously agreed to a £97m takeover by Towry Finance, which is a subsidiary of wealth manager Towry Holdings.

The deal will see Ashcourt Rowan shareholders receive 270p per share in cash, along with a principal amount of 5p in loan notes. This represents a premium of 60% of the closing price of Ashcourt Rowan on 30 January, and also represents an incredible 53% premium to the average closing price for the three months prior this this date.

The new entity is set to have around £11bn in assets under management, and will offer a wide range of services that the two companies believe will benefit from ‘a high degree of complementarity’. While specific details regarding synergies have not been released, increased scale should help them to better navigate the shakeup of the industry that occurred with the introduction of the retail distribution review in 2013.

Good Value?

While the takeover price undoubtedly represents good value relative to Ashcourt Rowan’s share price immediately prior to the bid, looking at the company’s potential over the next couple of years makes it arguably seem less so. That’s because Ashcourt Rowan is forecast to post earnings growth of 51% in the current year, followed by a further 43% next year and another 23% the year after.

So, while it trades on a price to earnings (P/E) ratio of 21.5 at the offer price, by 2017 this could have come down to just 12.3 if it meets its forecasts. As such, it could reasonably be argued that, when the company’s future prospects are taken into account, it may be the case that the offer price is not as generous as it appears to be at first glance.

Looking Ahead

Clearly, though, many investors in Ashcourt Rowan will be somewhat relieved to receive an offer for their shares. After all, the company’s share price performance during the last year has been relatively poor, with it falling from a 5-year high of 200p per share in late 2013, to 167p in recent months.

Meanwhile, looking at the financial advice and wealth management sector as a whole, there could be more consolidation to come. That’s at least partly because increased regulations are impacting firms in terms of administrative expenses and this means that larger scale could prove to be a competitive advantage that allows margins to be expanded and profitability improved over the medium to long term. Therefore, it is likely that sector peers will gain a boost in the short term from increased bid potential.

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.

Peter 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

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

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 »