03.12.2010

TVH bids for Lavendon

Belgian-based fork truck and access parts supplier TVH has made a cash bid to acquire Lavendon Group - Europe's largest aerial lift rental company.

The bid is worth around £185 million but TVH will of course also assume all of its debt, currently around £158 million.

A statement issued this morning by TVH says:

“The Board of TVH Services N.V. - the principle holding company of Group Thermote & Vanhalst - has made two approaches to the Board of Lavendon Group plc with a view to making a recommended cash offer for Lavendon, both of which have been rejected. The most recent approach was made on 30 November 2010 and indicated a price of 111 pence per share in cash for the entire issued and to be issued share capital of Lavendon."

The offer is made under Rule 2.4 of the UK Takeover Code and therefore is not a binding offer to acquire the business.

The TVH offer represented a 40.5 percent premium to the Lavendon closing share price on 30th November when it was made. The company also claims that it represents a 76.6 percent premium on Lavendon's average share price over the past three months.

The second approach from TVH was rejected by Lavendon the day after it was made.

The TVH statement made through the London Stock Exchange goes on to say:

“The Board of TVH believes that Lavendon is an attractive business, well positioned within the access equipment rental industry. However, the Board of TVH believes that Lavendon's ability to exploit new growth opportunities and invest in the economic recovery is somewhat limited by its capital constraints and, by combining the two businesses, TVH would be able to accelerate the investment needed into Lavendon's rental fleet, allowing it to take full advantage of the economic recovery and maintain and grow its competitive position within its markets.”

“The Board of TVH is considering its position and will make further announcements as appropriate. TVH remains committed to establishing a constructive dialogue with Lavendon's Board with the intention of agreeing a recommended transaction.”

Lavendon is the world’s largest specialist aerial lift rental company with over 21,000 lifts in its fleet. It operates in the UK as Nationwide Platforms, EPL Skylift and Panther, in Germany as Gardemann and in the Middle East as Rapid Access. It uses the Lavendon brand in Spain and France and DK rental in Belgium.

TVH is a privately owned family business, based in Waregem Belgium, the same town as DK rentals which was acquired by Lavendon in 2007. Established in 1969 by Paul Thermote and Paul Vanhalst, it has built a worldwide distribution business for supplying replacement parts and accessories for fork trucks and other industrial material handling vehicles. It is also sells used forklift trucks and access equipment. In Belgium it rents and leases fork lifts and access equipment. The company is still very much a family buisness with the management team made up of members of the Thermote and Vanhalst families.

Lavendon Response

Lavendon has issued a response to the TVH announcement which is as follows:

"The Board of Lavendon notes the announcement issued today from TVH in relation to its interest in a possible offer for the Company. The Board confirms that it received an approach from TVH proposing a recommended offer for Lavendon at price of 111 pence per share in cash on 30 November."

"The indicative proposal was subject to a number of assumptions, pre-conditions and other terms, including bank financing."

"Having considered the proposal carefully, the Board concluded that the approach was opportunistic and significantly undervalues Lavendon. Accordingly, the Board unanimously rejected the proposal on 1 December."

The company goes on to refer to comments it made in its recent interim statement regarding the full year being in line with expectations in spite of a slow start and the fact that its recruitment of two new non-executive directors who will help shape the group's future strategies is progressing well.


Vertikal Comment

This is a hard one... some shareholders will be pleased to take a profit on their Lavendon shares before year end, taking cash today rather than wait for jam tomorrow. Especially those who bought in at around 45p earlier this year.

However there is no question at all that TVH is making a run to acquire the group at what is still the bottom of the market, even allowing for the fact that the price it is offering is a substantial premium over the average share price in recent months.

Lavendon has made significant strides to develop its business over the last 12 months, preparing for the coming upturn, most of which has yet to filter through to its financial performance. The company has a wide variety of options open to it going forward, one of which would to generate cash which could translate into substantial dividends that make this offer look cheap in these days of low cash returns.

The group also has a significantly higher strategic value to larger players in the global rental business and the signs are that some of them are looking to get back on the acquisition trail. Private Equity groups are also looking for something that will provide a solid yield in addition to capital growth. As witnessed by the current bid rumours for Ashtead.

If I was a shareholder I am almost certain that I would sit this offer out and either wait for a better bid while benefitting from the return to dividend payments, or look to sell in two or three years closer to the top of the market.