- CareTech recommended 750p per share cash offer from consortium led by founders
- Deal represents 28% premium to undisturbed price
- Shareholders to get opportunity to co-invest in private vehicle
Specialist provider of social care housing and educational services CareTech (CTH:AIM) has recommended a takeover offer price of 750p per share from a consortium led by the founders, sending the shares up 21% to 739.1p.
The consortium has upped its offer from 725p per share following an approach from global asset manager DBAY advisors at 750p per share. DBAY has until the close of play today (27 June) to make a formal offer or walk away under London Stock Exchange rules.
Investment director at AJ Bell Russ Mould commented: ‘CareTech has been in play since March after the CEO and chairman declared an intention to bid for the group.
‘A rival approach was then made by DBAY at a higher price and the CareTech directors have now come back and matched this proposal with a firm bid. It comes at the eleventh hour, given that DBAY has until 5pm tonight to make an actual offer rather than simply a proposal.’
PREMIUM TO UNDISTURBED PRICE
The offer values the entire share capital of CareTech at £870.3 million which implies an enterprise value (equity plus net debt) to earnings before interest, tax, depreciation, and amortisation of 13 times.
The recommended offer represents a 28% premium to the closing price on 4 March, before start of the offer period and a 31.7% premium to the three-month volume weighted average price.
Shareholders are also being offered a partial share alternative to cash, allowing them to roll over their ordinary shares into non-voting shares in the capital of the indirect parent of the bidding company. The ratio will be specified in the scheme of arrangement document.
NEW FUNDING STRUCTURE
The board said the offer represents a ‘compelling opportunity’ and would be beneficial to all stakeholders. It described the offer premium as ‘substantial’ and announced the creation of a new long-term financing structure for CareTech.
Chairman Farouq Sheikh said: ‘Both Haroon and myself as founders believe that our offer for CareTech is in the best interests of all stakeholders. As the management team who founded and grew this business, we believe that we are best placed to ensure long-term continuity of management and care for our service users.
‘Shareholders will receive immediate value in the form of a significant premium to the share price before the offer was announced or the ability to co-invest with us for the long-term.’
CareTech is a running Shares Great Idea.
****UPDATE 1.30pm, 27 JUNE 2022***** Dbay has confirmed it will not make a formal offer for CareTech.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Martin Gamble) and the editor (Daniel Coatsworth) own shares in AJ Bell.
