Styles & Wood: shares worth more than mbo offer

The 125p-a-share management buy-out bid for Styles & Wood is on the low side, says an analyst with stockbroker Panmure Gordon.

Andy Brown thinks that there is more to come and urges clients to “buy” shares.

View the 12-month Styles & Wood share price graph

He has set a 150p target price which is 25p above the mbo’s figure and almost double the figure that shares were actually trading at immediately prior to the announcement of a potential ownership shake-up.

At that moment, S&W’s shares had been trading at 80p on the London Stock Exchange, and it is this “undervaluation” that triggered the move by chairman Gerard Quiligotti and chief executive Neil Davies.

When they floated the company in November 2006, shares were worth 150p.

Brown says: “A reasonably upbeat trading statement plus indicative cash mbo will keep the shares in focus.

“Considering the growth potential and cash-flow characteristics, we think that the indicative mbo is on the low side. We retain our positive stance.”

The 125p offer on the table represents a 56% premium to Wednesday’s close of play figure of 80p.

“Our ‘buy’ recommendation has been based on the market share opportunity, plus the ability to cross-sell added value support services into the customer base,” says Brown.

“This news confirms that further value exists in the shares. We expect the final value to be higher.”