Precision engineer Renishaw (RSW) has put itself up for sale after the founders told the board they want to offload their stake.
Executive chairman David McMurtry and non-executive deputy chairman John Deer said they are not ‘getting any younger’ and want to ensure the future of the FTSE 250 company.
Renishaw is a world leader in metrology (highly accurate measurement) and healthcare technology tools. McMurtry and Deer, both in their 80s, are looking to sell their entire holdings, which combined represent 53% of the firm they set up in 1973.
INVESTORS EYE QUICK PROFIT
Renishaw stock jumped almost 20% in early trading to close to a record £70 as investors bet on a bumper premium being offered by a buyer. But a buyout may not be the investment success many anticipate.
At 10.30am, the stock was changing hands at £67.85, 17% up on yesterday’s close.
The UK stock market is already facing a technology identity crisis with critics saying it lacks exciting companies at the tech and science bleeding edge, particularly among larger cap stocks. If Renishaw is sold to an overseas buyer it would strengthen that impression and further damage London’s reputation.
Many investors are still bewildered by the £32 billion sale of global microchips design champion ARM in 2016, when shareholders voted to take a quick profit rather than back years of potential above-average returns.
‘Takeovers may net investors a small premium to the market price, but they can also deny them substantial future gains if the shares were retained,’ says AJ Bell’s investment director Russ Mould.
SEARCHING FOR THE RIGHT BUYER
Renishaw confirmed that it is not currently in talks with anyone over a possible sale and McMurty and Deer are hoping to find a buyer ‘who will respect the unique heritage and culture of the business, its commitment to the local communities in which its operations are based, and who will enable the company to continue to prosper in the long-term’, but that may be a tough challenge.
‘The issue with Renishaw is that its shares already command a high valuation so any potential suitor would have to pay top dollar to buy the company,’ says Mould. Based on yesterday’s £58 closing price, Renishaw was trading on a June 2022 price to earnings multiple of 43.
Potential buyers are likely to be found in the US, or possibly Asia, where China is trying to pull itself up the technology and science value chain. ‘One could imagine an Asian company would be interested in owning Renishaw, but such a buyer may have different views on whose culture should prevail,’ adds Mould.
