EXEL, the FTSE 100 logistics group, yesterday hit back at claims that it had seized its smaller rival Tibbett & Britten for £328 million because it had run out of steam on its own.
John Allan, chief executive, said that the addition of T&B’s business would not only boost Exel’s geographical business spread, but also enhance cross-selling opportunities and boost organic growth potential. He said the deal would be earnings-enhancing for Exel investors in the first full year.
Mr Allan also said Exel had achieved 9 per cent growth in logistics revenue last year, the benefits of which would flow into this year. He said that this was proof of Exel’s internal business-generating potential.
His comments came as Exel announced its expected cash bid for T&B, offering 668p a share. Exel will also inherit about £50 million in net debt.
The offer, a 36 per cent premium to T&B’s Monday closing price, is backed by T&B’s board, which holds about 6 per cent. Exel bought 8 per cent of its target in the market yesterday. Some analysts said that Exel was overpaying, but Exel shares rose 9½p to 714½p.
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John Lawson, analyst with Investec Securities, said: “It’s a cracking price. You can argue the toss whether it’s too much or not. It’s one of those things. They (Exel) can see the synergy benefits and they are getting a client base.” Morgan Stanley, the broker, said: “The acquisition is too expensive, against Exel’s strategy and adds a severely troubled business to a company that has no credible record that it can turn around those operations. ”
The deal lifts Exel’s global market share in a fragmented contract logistics market from 2 per cent to over 3 per cent.
Mr Allan said that he expected annualised cost savings of up to £20 million by 2006.