NLX 0.00% 6.4¢ nylex limited

Takeover talk no comfort after Nylex fall After Nylex's profit...

  1. 706 Posts.
    Takeover talk no comfort after Nylex fall

    After Nylex's profit revision and 30 per cent share slump on Friday, it must be tempting for some investors in the diversified industrial group to vote against the recently announced related-party sale of the company's plant hire division, AH Plant, to National Hire.

    Kerry Stokes is a major shareholder in both Nylex and National Hire and as such cannot vote at the meeting.

    Some argue that given the diminution in Nylex's value since the sale was announced maybe Stokes should be bidding for the whole of Nylex rather than just buying one of its businesses.

    The meeting to approve the deal is being held just a few days before Christmas.

    Independent expert Ernst & Young gave the transaction its tick of approval late last week, arguing it was fair and reasonable for National Hire to pay $111 million for AH Plant. Nylex will book a $45 million profit on the sale and believes it can reinvest the proceeds into higher return businesses.

    The sale price works out to a sale multiple of 9 times the division's 2006 forecast earnings before interest tax and amortisation of $12.5 million, consistent with the trading multiples of local and international plant hire companies.

    But AH Plant is a big part of Nylex's earnings and without it investors are more exposed to its other businesses and have to again run the risk of the company hitting the acquisition trail.

    On Friday, Nylex warned its first-half earnings would be 70 per cent down on the first half last year, but the second half would be a vast improvement.

    Nylex has been talked about in this column as a takeover target and it may yet prove to be attractive to other diversified groups and private equity firms.

    But that's little consolation after Friday's horrific fall.

 
watchlist Created with Sketch. Add NLX (ASX) to my watchlist

Currently unlisted public company.

arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.