BROKER RECOMMENDATIONS

Date Broker Recommendation Price Old target price New target price Notes
08 Jul RBC Capital Markets Outperform 196.75 - 280.00 Reiterates
30 Jun Credit Suisse Neutral 196.75 225.00 225.00 Reiterates
13 Jun Deutsche Bank Buy 196.75 240.00 245.00 Reiterates
12 Jun Cantor Fitzgerald Buy 196.75 250.00 250.00 Reiterates

StockMarketWire.com
Premier Farnell said its FY pretax profit has fallen to GBP29.2m, from GBP54.1m. Revenue was GBP903.9m, from GBP886.6m.

Proposed final dividend is 3.6p a share, down 40% on the year. Total proposed for 2015/16 dividend is 6.2p, also down 40% on the year, following previously announced dividend rebasing.

Chairman Val Gooding commented:
"We have commenced implementation of a series of actions in the past year to address a challenging period for Premier Farnell. The operational review has already yielded positive results which we will continue to build on.

"On 16 March 2016, we completed the sale of Akron Brass for $224.2m, enabling the company to reduce its net debt and concentrate on its core activities. We have also rebased the dividend to a level from which we aim to deliver a sustainable and progressive dividend policy.

"Following an extensive global search, we were delighted to announce last week the appointment of Jos Opdeweegh as Chief Executive of Premier Farnell. His strong international experience and track record of value creation provides a strong platform for the next stage of our development."

Anyone have an opinion on whether a counter bid is likely.

I'm currently holding both CSG &PFL in takeover situations wondering what to do with both of them.

If the FTSE goes stupidly low I'll sell CSG for sure but not clear on PFL at all.

StockMarketWire.com
Datwyler Technical Components UK Ltd, a subsidiary of Datwyler Holding AG, has made a recommended 165p-a-share cash bid for Premier Farnell. The cash consideration implied an enterprise value of £792m.

In addition, Premier shareholders on the register on May 27 would remain entitled to receive the FY proposed final dividend of 3.6p a share cash.

The combined group would operate a global Technical Components division with approximately 4900 employees, more than 1m products stocked in warehouses and was expected to generate revenue of about CHF1.8bn.

"Datwyler believes the combination of Datwyler and Premier Farnell represents a strong strategic fit and is highly attractive," it said in a statement.

"Both companies share very similar strategic values and are highly complementary in terms of product range, distribution channels and geographic footprint.

"The Transaction creates a leading high-service electronic components distributor in Europe and the combined platform will enable the Combined Group to realise significant economies of scale compared to Datwyler's standalone strategy, particularly in the context of a large addressable and fragmented high-service electronic components sector worth approximately CHF30-40 billion, in which the top five distributors have a sector share of little over 15 per cent.

"Complemented by efficiency gains from an overlapping cost base, increased capillarity and acceleration of ongoing restructuring efforts on both sides, the Combined Group is also expected to deliver enhanced margins through a low cost structure going forward."

No idea about a counter bid, but nothing has appeared yet, so see no reason to assume anyone else is interested.

Comment from Olivetree:
"Given the presence of activists on the register, and the general underperformance of Premier Farnell stock, the market has often speculated as to a creative outcome for the company. One of the more popular ideas in the last couple of years has been a merger with Electrocomponents (ECM LN). The latter established a new management team only last year, replacing a previous CEO who had run the company for 13 years, so there was hope that such developments could lubricate such a transaction. There were also calls for a break up of Premier Farnell, the pressure was to sell its Akron Brass fire-fighting subsidiary, perceived to be a poor fit with the larger electronics business. This sale was eventually announced in September last year and the details of the sale were confirmed in February 2016. Hence the next step for activists was likely to be consolidation with another industry player – something we are now seeing today.
Datwyler has secured irrevocables from 18.5% of Premier Farnell’s register, from JO Hambro, Majedie and (activist) GO Investment Partners. These irrevocables generally release in the event of an offer from a third party that is only 5% better than the Datwyler offer (ie 173.25p).
It is worth noting that Electrocomponents equity rating continues to look powerful relative to that of Premier Farnell, so a potential merger could continue to make sense. Rumours of such a transaction have never been far from the market, as recently as 9th October 2015 the press reported such speculation. The perception was generally that GO had taken its stake, post two profit warnings from Premier Farnell, in order to engineer such a tie-up. The industry backdrop continues to appear ripe for consolidation, so such a transaction cannot be entirely ruled out, especially given that Datwyler’s irrevocables are released so easily. With a current market cap of £1.2bn, Electrocomponents is much larger than Premier Farnell, although it is still smaller than Datwyler’s £1.7bn market cap. Electrocomponents’ equity currently trades on some 10.8x EV/EBITDA, compared with Premier’s 6.5x, so it does have a powerful acquisition currency, both on a relative and absolute basis."

RBC comment:
Our view: The 165p cash offer compares well with our previous 155p target and given weak trading, historic issues, management change and gross margin pressures, we feel this is a good price, although wouldn’t rule out a counterbid. We downgrade to Sector Perform and increase our target to 165p in line with the bid from Daetwyler.
Key points:
Recommended cash offer – Daetwyler has made a recommended cash offer at a 51% premium to last night’s close of 165p per share, which values the group at £792m. This compares to our prior DCF target price of 155p and equates to a calendar 2016E PE of 16x and EV/EBITA of 12x. Shareholders will also receive the 3.6p final dividend payable on 23 June. Management believes it can extract CHF50-70m (£37-51m) synergies from the deal (50% gross profit and 50% cost).
Decent price – Given weak trading, the history of disappointments, management change, gross margin pressures, and the cycle – we see this as a good price. However, the valuation is below that of key peer Electrocomponents,(2016E PE 20x, EV/EBITDA 16x). The synergy target is a big number for a business that doesn’t have huge overlap, hence we would think that the synergy number for one of the closer peers e.g. Electrocomponents would be larger – indeed we have previously stated that we think £60m could be achieved by a combination with it, although the new management team has plenty on its plate with its own restructuring plans. Mouser and Digikey in the US also have good overlap and a strong dollar potentially to entice them. As such, despite this being a good price we wouldn’t rule out a counterbid.
Q1 Trading weak – PFL has also put out a Q1 trading update – LFL growth was -1.4% down from +0.4% in Q4, with weakness in the UK (-7%) and USA (-9%) offset by Europe (+4.8%) and Asia (+26%). Cost savings do appear to be on track and management has initiated some restructuring in the USA.
Downgrade to Sector Perform – Given our view that this is a fair price, we downgrade to Sector Perform and increase our target price to 165p, in line with the offer. This compares to our previous DCF derived target price of 155p."

hmm. So for a while today this was trading at a penny above 165p cash offer.

I guess I'll hold. Someone always knows something

SUSPENSION OF LISTING AND TRADING OF PREMIER FARNELL SHARES
On 13 October 2016, Premier Farnell announced that the High Court of Justice in England and Wales had made an order sanctioning the scheme of arrangement (the "Scheme") relating to the recommended cash offer by Bidco, an indirect wholly-owned subsidiary of Avnet, for the entire issued and to be issued share capital of Premier Farnell (the "Acquisition").
Pursuant to the terms of the Scheme and Listing Rules 5.1 and 5.3 and following an application by Premier Farnell to the UKLA and the London Stock Exchange, Premier Farnell announces that trading in Premier Farnell shares on the London Stock Exchange's Main Market for listed securities and the listing of Premier Farnell shares on the premium listing segment of the Official List have each been suspended with effect from 7:30 a.m. on 17 October 2016.
Capitalised terms in this announcement (the "Announcement"), unless otherwise defined, have the same meanings as set out in the scheme circular published by Premier Farnell on 19 August 2016.
Next Steps
It is expected that the Effective Date of the Scheme will be today, and that the delisting of Premier Farnell Shares on the London Stock Exchange will take place with effect from 8:00 a.m. on 18 October 2016. Further announcements will be made when the Scheme has become effective and when the admission to listing and to trading of the Premier Farnell Shares have each been cancelled.