The Primero share price is rocketing higher today after the company announced it has received a takeover offer from NRW Holdings.
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Primero Group Ltd (ASX: PGX) shares are on the rise after the company announced it has received a conditional off-market takeover offer from NRW Holdings Limited (ASX: NWH). At the time of writing, the Primero share price has surged 10.42% to trade at 53 cents. The Primero board has unanimously recommended Primero shareholders accept the offer, which consists of 27.5 cents cash plus 0.106 NRW shares for each Primero share.
In addition to the surge in the Primero share price, following the announcement, the NRW share price has also risen by more than 4% to $2.70.
Details of the takeover offer
The Primero share price is rocketing higher after the company advised the takeover offer values it at an equivalent of 55 cents per share, or a total equity value of approximately $100 million. This represents a 14.6% premium to the closing share price of Primero on 23 November 2020.
The board says this offer represents value for shareholders. It is worth noting however that Primero’s directors collectively own or control approximately 30% of Primero shares. Each of those directors has confirmed they will accept the offer in respect of all Primero shares they own. Primero also says that its management team will remain with the business under NRW ownership.
NRW has confirmed that it will fund the acquisition through a combination of cash on its balance sheet, and a $50 million bank loan facility.
Why the takeover?
Both companies believe there are synergies to be achieved through this merger, which will allow the combined entity to expand to other business pipelines and opportunities.
NRW Chief Executive, Jules Pemberton, says:
The acquisition of Primero will provide NRW with the opportunity to expand its Minerals, Energy & Technologies specialised capability and to leverage the combined expertise of both companies to pursue new business initiatives across a large pipeline of opportunities.
NRW and Primero have already been working together on a number of projects and we look forward to continuing to work with the Primero team to build out Primero’s design, construction and operations capabilities through NRW’s client network, and expect that the combined operations of NRW and Primero will present clients, employees and shareholders with compelling outcomes
Primero Chief, Cameron Henry, says that the transaction is compelling as it will allow Primero shareholders to avoid dilutive capital raising. He says:
The NRW offer allows Primero to avoid the need for a potential significantly dilutive capital raising to fund working capital required to deliver on our FY21/22 contracted order book.
The combination of NRW’s diversified delivery model coupled with the Primero capabilities will provide our client base with a unique end to end delivery model that will differentiate within the current market and will rapidly accelerate Primero’s growth strategy.
Quick take on Primero and NRW
Primero is a vertically integrated business that provides engineering design, construction and operational services to the minerals, energy and infrastructure sectors. The Primero share price has risen by more than 51% in 2020, and it commands a market capitalisation of around $82 million.
NRW is a much bigger company than Primero, and is a provider of contract services to the resources and infrastructure sectors across most states of Australia. The NRW share price has fallen by 14.8% in 2020, and it commands a market cap of $1.1 billion.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.