White Young Green: takeover talks end

White Young Green, the consultancy group, has confirmed that talks regarding a possible takeover have evaporated.

The company made the announcement to the Stock Exchange at 12.40 today.

In the 30 minutes prior to that WYG’s share price had dived from 295p to 270p.

Who was after WYG? Well the speculation is that the two names in the frame were both Dutch players: Arcadis and Grontmij.

Why did they walk away? Mike Allen, analyst with stockbroker Panmure Gordon, says the answer to that will be of interest to shareholders. “One potential concern could be the above-average level of debt in the business,” he says.

WYG’s gearing - the ratio of debt to assets - is high at 75%.

A further risk could be WYG’s exposure to the Irish economy, adds Allen. His advice to those who had been watching the situation is to switch their money from WYG as Scott Wilson and WSP offer better prospects.

Allen has trimmed his valuation of  WYG’s shares back massively, from an existing figure of 352p (based on the takeover possibility) to a much more modest 234p.

“Trading appears to remain strong and in line with expectation,” he points out. “This is no surprise given the outlook statement we have seen from its peers recently.

“If we do have a slowdown in the UK and Irish public sector spending, WYG could be one of the first in this space to suffer.”

Scott Wilson gets the nod ahead of WYG “on valuation grounds and given its strong balance sheet” while a second competitor, WSP, is regarded as having “superior geographic and market spread of business compared with WYG”.