Office services company IWG (IWG) shares jump over 20% to 303.5p as three separate companies have expressed interest in acquiring the firm.
This not the first time the company, which operates in 114 countries, has been the subject of takeover speculation. Shares highlighted the last time the company had potential buyers interested.
That M&A news fizzled out when Canada’s Brookfield Asset Management and private equity firm Onex said they would not make another offer after IWG rebuffed their £2.5bn bid.
Now the company, formerly known as Regus, is in receipt of two indicative proposals and one approach.
The proposals come from US property firm Starwood Capital and private equity house TDR Capital with a further approach being made by US buy-out outfit Lone Star.
Given the heightened level of interest compared to the December bid, this increases the level of competitive tension and could potentially see the share price move higher.
MOVING PARTS
As with any offer for a large company, IWG has a market cap of £2.76bn after today’s share price move, there are a lot of things that could go wrong.
IWG’s statement not only says that ‘there can be no certainty that any offer will be made for the company’ it was also made without the consent of the bidding parties.
Another factor to bear in mind is founder Mark Dixon. He has been selling down his stake in the company although remains the largest shareholder. In June last year he sold £92.4m of the company’s shares after previously selling large swathes of his holdings off in 2015 and 2016.
Andrew Shepherd-Barron, analyst at broker Peel Hunt, says management factors ‘including Mark Dixon and his desire to remain involved’ will impact the price the company will fetch. He adds that ‘vulnerabilities in its most profitable markets such as London’ may also drive the price.
IWG trades on 19.6-times 2018’s 15.5p of earnings using Peel Hunt’s forecasts. The company has been impacted by competition from rivals such as WeWork which Shepherd-Barron describes as ‘aggressive’.
He adds that the benefit of being private rather than public includes the fact ‘growth could be accelerated’ which along with the long term demand for serviced offices makes IWG an attractive proposition for the parties bidding for it.
