- £19.50 per share deal less than a third of historic peaks
- End markets have been soft for XP Power
- Management confident in widespread recovery given time
Singapore-based electrical engineer XP Power (XPP) has firmly rejected a cheeky buyout, and quite right too. The offer, made by precision power kit peer Advanced Energy Industries, is pitched at £19.50 per share, the latest in a run of offers made privately to XP Power management having got the ball rolling with a £17 per share proposal made more than six months ago.
The latest offer values XP Power at £468 million.
CAUGHT BETWEEN WASHINGTON AND BEIJING
XP Power has been struggling for several months after demand for its critical power control components dipped significantly. Inventory build-ups, slow investment decisions and the ongoing technological tensions between the US and China have all hurt business and led the company to warn investors that it would miss forecasts twice in recent months, leaving the share price at its lowest ebb in nearly 15 years.
XP Power also axed its dividend, a key part of the wider investment case in the eyes of shareholders.
The stock has staged a recovery of sorts in 2024 but even after surging nearly 50% today to £17.21, it remains at less than a third of near £56 all-time highs in 2021.
WHY MANAGEMENT REJECTED BID
Crucial to management’s rejection is a view that the current softness of customer orders is temporary and that its end markets will pick up again in time. XP Power serves customers in industries including healthcare, defence, aerospace, rail, and in the semiconductors space.
While Advanced Energy argues that the proposed offer for XP Power provides ‘compelling value for both Advanced Energy’s and XP Power’s shareholders’, according to Steve Kelley, the president and chief executive of Advanced Energy, it holds classic hallmarks of an on-the-cheap buyout of a fundamentally good business going through a rough patch.
XP Power’s board have told shareholders to take no action in relation to the proposal. It added that performance to date has been line with the board’s expectations.
