The company jumps 32.9% to 109p on the news that Element Materials Technology has been lined up to buy its testing services business TRaC for £44.5 million in cash.
BioQuell would make a £35.4 million profit, before expenses, from selling the business it has run for the past decade. This equates to 105p a share, a 28% premium to Wednesday’s 82p closing price.
In 2013 TRaC made a £3.4 million operating profit from £16.8 million of sales. Elizabeth Klein, an analyst at N+1 Singer, welcomes the deal. ‘We believe that this is a more than fair value for TRaC, and slightly ahead of what we had argued were the take out multiples for businesses in this area at some two times sales.’
The deal will allow BioQuell to concentrate on driving organic growth its core biological contamination control business, which serves the healthcare, defence and life sciences industries.
Pre-tax profits have fallen in each of the past three years and this is the latest move by management to reverse the trend and improve shareholder value. Cost cutting and adding new products to its offering have been early initiatives.
The deal is expected to close by the end of April.
Investec comments: 'The divestment, if approved, will lead to a healthy cash return to shareholders and leave Bioquell focused entirely on its biologic contamination business. For investors, questions will likely remain on the Bio division’s future growth but the divestment, if approved, does simplify the investment case and should see a significant re-rating of the shares from today’s level.'