Oil services firm Kentz (KENZ) has confirmed separate takeover approaches from UK-listed peer Amec (AMEC) and Germany's M&W Group GmbH propelling the shares up 23% to 585.5p.

The company says it rejected an initial cash offer of 565p to 580p from Amec and a subsequent lower offer from M&W because they undervalued the business. It promises to keep shareholders updated on developments and is scheduled to issue its financial results for the six months to 30 June next Tuesday (27 Aug).

VSA Capital comments: 'We would regard this morning’s approach as welcome news but still towards the lower end of what we think the company could be bought for. If a deal was to go ahead at anything less than 700p we would regard it as a very cheap acquisition.'

The industry is arguably recognising value which has been neglected by the market for some time. In our latest piece focusing on the sector as a whole (Sector Report, 25 Jul '13) we highlighted the undemanding rating afforded Kentz and its excellent track record of converting a pipeline of potential orders into contract awards and awarded contracts into cashflow. We also looked at the investment case in more detail here.

The company's history goes back almost a century. It started life as a local electrical contractor based in County Tipperary, Ireland and first began operating internationally in the late 1970s – successfully completing a project with Fluor (FLR:NYSE) in Saudi Arabia.

From these humble beginnings it has been able to grow throughout the Middle East and beyond – providing engineering and construction support on a number of large infrastructure projects including Chevron's (CVX:NYSE) Gorgon liquefied natural gas (LNG) development in Western Australia. At the latest count its pipeline totalled $14 billion with an order book of $2.8 billion.

Issue Date: 19 Aug 2013