If you have never heard of them, which is a distinct possibility, this would be a good opportunity to gauge the risks and possible rewards associated to both shares.
Netcall announced today that it was in “advanced discussions regarding a possible acquisition by Eckoh” in a deal set to be financed by cash and stock. The acquirer offers secure payment solutions and is a good fit for Netcall, which is a process management software and services business.
The terms are “1.25 Eckoh shares and 13 pence in cash for each Netcall share“, which would would imply a value of about 63.94p for each Netcall share, based on the closing mid-market share price per Eckoh share of 40.75p on 24 June 2015.
Judging by the reaction of both stocks on the market, investors seems to believe that the deal will be done on these terms — or, at least, at a very similar price.
That said, given that “Eckoh reserves the right to introduce other forms of consideration and/or vary the proposed mix of consideration in any offer“, there remains room for a larger cash component.
Eckoh has struggled to create value ever since mid-2014, but its trailing performance before then was truly impressive, and should it bulk up by acquiring Netcall, whose stock trades at a significant discount based on P/E multiples, it could be an equity investment worth keeping as part of a diversified portfolio, particularly if “significant synergies” — which will be targeted — are actually achieved.
Eckoh’s full-year results were also released today, and made for a good reading.
It announced today that it had completed the acquisition of Croydex Group Ltd for a “total consideration of £21.9m, of which £20.8m has been settled in cash and £1.1m consideration deferred for three years“.
The deal was funded entirely by debt through existing facilities, hence it’s accretive to earnings from day one. Norcros clearly boosts its offering with Croydex, given that the target manufactures and distributes high-quality bathroom furnishings and accessories both in the UK trade and retail segments.
The group has found it more difficult to deliver value since early 2014, but I doubt it’ll stop with Croydex, as it needs growth to shore up its valuation. While it doesn’t look expensive, and it pays dividends, which are covered by earnings, I would not invest in it at present — but I’d keep an eye on future trading updates, paying particular attention to key cash flow metrics and trends for core operating margins.
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Alessandro Pasetti 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.