Shares in used car auction house BCA Marketplace (BCA) shot up 13% to 238.5p as the company revealed a takeover approach. The 200p per share all cash offer came from private equity giant Apax Partners in May, a deal that was swiftly rejected by BCA, which owns the webuyanycar.com website.
Apax will clearly have to offer considerably more given the market's reaction and the share price now trading far above the valuation so far pitched. The private equity house has until 8 July to make an improved offer or walk away.
OPPORTUNISTIC MOVE
Investment director of AJ Bell Russ Mould says a takeover approach for BCA Marketplace looks like classic private equity behaviour: swoop when someone is temporarily down.
‘A sharp decline in the share price earlier this year - amid widespread concerns about demand for new and second hand cars in the UK - has resulted in bid interest from Apax Partners. The share price went from 204.2p at the start of 2018 to a low of 149.6p in March’.
Mould adds that as the shares are now trading at an all time high above 238p implies the market is expecting Apax or someone else to bid a higher price.
The market reaction to the Apax news being made public has been a share price rally. This might put off other potential suitors wanting to show their hands unless they are sure they can make good returns further down the line.
BCA was previously owned by private equity group CD&R although it has completely sold out, so there is no share overhang that often weighs on former private equity-backed floats.
ANALYST'S VIEW
Brokers have been remarkably upbeat on the company even when its share price was showing the impact of a market slowdown.
Matthew McEachran, analyst at N+1 Singer, said in April when the share price was down at around 163p ‘BCA’s year-to-date de-rating fails dismally to take account of the favourable channel shift in the used car market and BCA’s market position given its unique physical auction and data platform.’
Using forecasts by N+1 Singer, BCA trades on 19.7-times 2019’s earnings and paying a prospective dividend yield of 3.8%.
