Shares in Scapa (SCPA:AIM) jumped 25% higher on Wednesday to 222p after the bonding solutions and wound care specialist recommended a cash takeover offer from Schweitzer-Mauduit International pitched at 210p per share.
Scapa shares traded at a 5% premium to the offer price suggesting investors expect it will take a higher offer to secure the deal.
BIGGER SCALE REQUIRED
Despite progress made to position the Healthcare division into a Global Contract Development and Manufacturing organisation, current levels of capacity utilisation have impacted Scapa’s growth opportunities.
The Industrial division is recognised for its broad range of products such as adhesive tapes, films and foams. Yet according to Scapa, it remains a niche player in specific markets and lacks the scale to compete in higher volume markets where ‘larger companies are able to better maintain a competitive advantage’.
The directors believe that the proposed combination would allow both companies to service new markets, increase scale while also offering cross-selling opportunities to enhance organic growth.
RECOMMENDED OFFER
The board said the offer, which represents a 58.5% premium to the six-month average weighted price and an enterprise to EBITDA (earnings before interest, taxes, depreciation, and amortisation) multiple of 13.8 times, represents ‘compelling value’.
Russ Mould, investment director at AJ Bell commented: ‘Scapa’s board is recommending the offer although the shares are trading higher still, to perhaps suggest shareholders may look to hold out for a little more from the would-be buyer, or even a counter-offer from another company.
‘After all, Scapa’s shares were trading at 272p just prior to last February’s profit warning and the shares peaked at 516p in June 2017.’
