- Latest ‘unsolicited’ offer spurned
- TI Fluid Systems confident in standalone prospects
- ABC ‘remains interested’ in a deal
TI Fluid Systems’ (TIFS) shares motored 14% higher to 166.4p on news the automotive fluid storage and delivery specialist has become the latest down-on-its-luck UK company to receive a bid approach.
In fact, Oxford-headquartered TI Fluid Systems has rejected two takeover offers from Canada’s ABC Technologies on the basis the bids ‘significantly undervalued’ the FTSE 250 firm and its prospects.
Majority-owned by private equity giant Apollo, ABC Technologies’ initial proposal in August, which was pitched at 165p per share, was rebuffed by TI Fluid Systems.
ABC followed this up with a second ‘unsolicited, highly preliminary’ all-cash offer on 4 September that was pitched at 176p per share, a 20.7% premium to TI Fluid’s undisturbed share price.
Despite the rejection, ABC Technologies said it ‘remains interested in a possible transaction’, meaning it is likely to come back with an improved bid.
TI FLUID SAYS ‘TAKE NO ACTION’
The board of TI Fluid Systems, which designs and makes automotive thermal management and fluid systems suitable for all vehicle types, stressed it is ‘confident in the strategy and prospects of the company’ and ‘strongly urges shareholders to take no action at this time’.
As for ABC Technologies, which makes and supplies technical plastics and lightweighting innovations to the global car industry, it now has until 12 October to announce a firm intention to make an offer for TI Fluid Systems under the UK takeover rules.
TAKE THE MONEY AND RUN?
Russ Mould, investment director at AJ Bell, said TI Fluid Systems has struggled to make much headway since its 2017 IPO (initial public offering), not helped more recently by the uncertainty in the automotive market where regulation is pushing for a transition to electric vehicles but consumer demand isn’t keeping up.
‘This makes it difficult for TI Fluid’s clients to make investment decisions, even if TI Fluid has worked hard to make itself “propulsion agnostic” – i.e., it doesn’t matter if the demand comes from EVs or traditional petrol vehicles,’ said Mould.
He added: ‘Against this backdrop, shareholders may conclude they are best taking the money on the table from ABC, but this would mean a further thinning of the ranks of a UK market which has been picked apart in recent years by overseas predators.’
In August, TI Fluid Systems reported a modest uptick in operating profit to €95.8 million on revenue down 2.8% to €1.72 billion for the half ended 30 June 2024 amid a softening automotive industry backdrop.
However, with productivity and efficiency measures on track, the company issued an improved full year margin outlook.
At the time, CEO Hans Dieltjens commented: ‘We have a strong pipeline of productivity initiatives and are agile to respond to changing market conditions. As a result, we have raised our full year adjusted EBIT (earnings before interest and tax) margin expectation to above 7.6% in a market with a slightly softer near term outlook.
‘Bookings are up 11% year-on-year, highlighting the advantages of a product portfolio catering to all propulsions and the benefits of growing demand for hybrid vehicles.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
