Barlo offer ‘must be raised by 17m’

BARLO chief executive Tony Mullins will have to raise his initial 53 million takeover offer for the company by at least 30% — E17.6m — according to Dolmen Securities.

Dolmen analyst Stuart Draper said, theoretically, 45 cents a share for the plastics to radiator company could be seen as a fair price but said that but for Mr Mullins’ 30 cents a share offer for the company the shares would currently be trading in the high 20s and not at 34 cents a share.

“At the end of the day a price of not less than 40 cents a share would be a fair price,” he added. Mr Draper said the independent board committee of Barlo Group is still engaged with the possible MBO offer, with a view to reaching an offer capable of recommendation to shareholders.

“This statement confirms that there is still real potential of a deal taking place,” he said.

However, Mr Draper believes that in order to be recommended, the initial 30c per share approach will have to be substantially improved upon. He pointed out that as of November 30 excluding goodwill of close to 50m, Barlo had a tangible net asset value (NAV) per share of 41c.

“At 40c per share, Barlo would still be trading at an EV/EBITDA multiple of 5.2x, largely in line with its current sector average of 5x, and still at a discount to the c.7x EBITDA which Bosch paid for Buderus, a leading European heating equipment manufacturer,” he added in a note to clients yesterday.

Mr Draper said profit after tax and earnings per share of 2.5m and 2.22c were year-on-year increases of 42% and 25%, respectively, for the first six months ending September 30.

He believes this indicates that a meaningful recovery in the company’s trading performance has now started.

Mr Draper said Barlo also generated operating cash inflow of E8.3m, and as a result, was able to reduce its net debt from E114.3m as to E115.1m.