US-based manufacturer Colfax has bid £1.5bn for Charter International, owner of two engineering firms specialising in welding and automation as well as air and gas handling.
Two weeks ago buy out firm Melrose made an offer of 850p per share (equal to £1.42bn), after Charter rejected its two previous offers. Colfax’s offer of £1.5bn is equal to 910p per share – far above what Charter expected, according to a company spokesperson.
“The board believes this is an attractive offer for Charter shareholders,” said chairman of Charter Lars Emilson. Charter also said that it was impressed with Colfax’s reputation for quality brands and viewing its business in the long-term rather than just the short-term.
Chairman of Colfax Mitchell Rales said: “Charter shareholders will receive an immediate premium and share in the upside of the combined company through the stock component of our offer, while Colfax shareholders will benefit from the significant earnings accretion and value creation opportunities that this combination will create.”
Melrose is still able to put in another bid for Charter if it wants to. The buyout firm can make a bid before September 21 if it wishes under a ‘put-up-or-shut-up’ deadline, but it is nearing the limit of available funds.
Robin Johnson, partner and chair of the industrial engineering group at international law firm Eversheds, commented: “The engineering sector is seeing significant M&A activity at the moment, and at increasingly high multiples. Continued investment in end markets, like oil and gas power generation and nuclear, as well as the desire of original equipment manufacturers for a strong global supplier base working in partnership with strong industrials, means that growing through strategic acquisitions is key for engineering companies. This, taken together with a noted scarcity of opportunities, has resulted in higher multiples.
“Despite general negative macroeconomic sentiment, engineering remains robust as global needs for capital investment in energy markets remains undiminished. We can expect to see several more deals in the pipeline in the near future, as well as an increased presence from Asian acquirers looking for the best technology.”