-M&C Saatchi shares continue to rise
-AdvancedAdvt believes Next15 bid fails to reflect synergy potential
-A higher offer price may be required
Shares in advertising agency M&C Saatchi (SAA) continued to be in demand on Monday rising 1.6% to 216p.
This follows today’s news that AdvancedAdvt (ADVT) the acquisition vehicle headed by serial software entrepreneur Vin Murria, believes Next Fifteen Communications’ (NFC) offer for M&C Saatchi does not fairly reflect the potential to unlock significant synergies.
In December 2019, shares in M&C Saatchi plunged 45% after the group acknowledged that its accountancy scandal was much more severe than initially thought.
This triggered a profit warning and was followed in January 2020 by an FCA investigation, resulting in the shares falling a further 9% to 100p, valuing the company at £93 million.
At the start of the pandemic in 2020, Murria acquired a 12.5% stake in M&C Saatchi at 40p per share for £6 million.
In January, AdvancedAdvt acquired a further 12 million shares in the group, at a price of 200p. This represented a near 20% premium to the 167p stock price at the time of the transaction.
AdvancedAdvt and Vin Murria own 22% of M&C Saatchi.
NEXT15 GAZUMPS ADVT'S BID FOR M&C SAATCHI
Last week, M&C Saatchi rejected a £253.6 million approach from AdvancedAdvt.
This opened the door for rival Next Fifteen Communications to make an improved bid of 247.2p a share, 19.1% higher than Advt'’s 207p a share offer.
Under the terms of Next Fifteen’s offer shareholders would receive 40p in cash and 0.1637 of shares in the enlarged group for each M&C Saatchi share they own.
The rationale for the merger is to create a business with a broader scale and geographic scope. M&C Saatchi has an established presence in in Asia and Australia, whereas Next15 is more focused on the UK and American markets.
The Next 15 bid values M&C Saatchi on a forward price earnings ratio of 17.5x. Broker Peel Hunt have increased their price target on M&C Saatchi from 208p to 247p.