US private equity firm Lone Star has made a last ditch effort to convince the board of Senior (SNR) to accept its takeover proposal. The UK aerospace engineering business has been pursued by Lone Star since the end of May but so far, the board of Senior has resisted all attempts.
The latest Lone Star proposal is its fifth and final, pitched at 200p per share which values the aircraft parts business at approximately £838.8 million. The offer would have been worth approximately £1.045 billion on an enterprise value basis, which includes Senior’s rough £206 million of net debt.
Senior shares jumped 12% in response to Lone Star’s sweetened deal, yet at 169.67p, the stock continues to trade significantly below the offer price.
Senior’s board has yet to respond to the latest offer.
According to Lone Star’s calculations the sweetened offer represents a 69% premium to Senior’s closing price of 118.3p per share on 27 May 2021, the last closing price prior to the commencement of the offer period.
The premium is 78% based on Senior’s three-month volume weighted average price of 112.2p per share as at 27 May 2021, notes the private equity investor as it looks to raise the pressure on Senior’s board to accept the bid.
WHY LONE STAR WANTS SENIOR
Senior designs and manufactures high-technology components and systems for original equipment manufacturers in the aerospace, defence, land vehicle, power and energy markets.
Yet these end markets have been volatile for some years, leading to what analysts at Berenberg called an ‘uninspiring’ financial performance.
‘Even before the impact of Covid-19, Senior had suffered from the Boeing 737 MAX grounding and weak industrial end-markets before that,’ said Berenberg.
Lone Star’s rationale seems to be pitched on the idea that it could speed up Senior’s financial recovery. This may include more aggressive cost cutting in order to accelerate and exceed the current margin recovery profile, but it may also include selling off parts of the business.
According to Berenberg, Senior put its aerostructures unit (42% of group revenues in 2019) up for sale at the end of 2019, but pulled the sale in April 2020 despite receiving strong interest.