黑洞社区

Analysts expect US investor Cathexis to up its offer for UK contractor ISG, after its initial 拢71m offer for the firm was swiftly rejected by the ISG board last Friday.

Cathexis鈥� offer of 拢1.43 per share last Friday morning represented a 17% premium on the firm鈥檚 closing share price the previous day - but was dismissed within hours by the ISG board which said it 鈥渟ignificantly undervalues the company鈥�. No further offer had been made as 黑洞社区 went to press.

黑洞社区 Value analyst Tony Williams said Cathexis 鈥渨ill clearly have to offer more鈥�, adding that a bid of up to 拢2 per share for the firm was feasible.

Williams said he was 鈥渟urprised鈥� no one else had made an offer for ISG before as it 鈥渉as a good core business with a good core skill-set鈥�, as well as 拢1bn-plus revenue and a small balance sheet.

Meanwhile, Nick Spoliar, analyst at WH Ireland, said the firm was attractive due to its 鈥渇antastic position in fit-out in the UK鈥�.

In its statement rejecting the Cathexis offer last week, the ISG board said it would write to its shareholders advising them to 鈥渢ake no action鈥� and not sell their shares.

The offer comes after a difficult trading period for ISG caused by problem legacy contracts in its UK construction division, which led to a profit warning earlier this month, and a 拢12.9m pre-tax loss for the year to June 2015, posted in September.

In its offer statement Cathexis argued that ISG would be better suited to private ownership 鈥渄ue to the size of the company, the nature of its business, the cyclicality of its markets and the volatility of its share price and trading performance鈥�.

The statement also revealed that ISG had rebuffed a previous takeover approach by Cathexis in June for the same reason. Cathexis argued ISG鈥檚 profit warning this month 鈥渞eaffirmed its conclusion that ISG ought to be a private company鈥�.

It added: 鈥淐athexis believes the offer provides the certainty of a realisable value to ISG shareholders and allows them to mitigate the inherent risks that the company鈥檚 core construction business, by its nature, is unpredictable and prone to extraordinary losses from time
to time.鈥�

Cathexis is seeking approval from 90% of ISG shareholders to seal the deal. It already owns 30% of ISG鈥檚 shares.