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Animal care reverse takeover
There was some comment on Paul's blog today about this which I thought deserved it's own thread.
What does everyone think about this and is anyone doing anything different as a result?
Carey
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15 comments
My advice is that if you own shares in a company that is taken over then just sell out. Then conduct a thorough analysis of the new merged company later on and only buy it if you are convinced that the enlarged company is a sound buy. Sometimes it will be. and sometimes you might find better prospects elsewhere.
For the long time followers of Animalcare (LON:ANCR) out there, news today that Iain Menneer has resigned as COO. Was he pushed - or left voluntarily- we’ll probably never know. However I suspect he disagreed with the strategic direction the company was going in.
It looks like Carson & Brewster have done a real number here. Not only have they got rid of the guy who made the company into what it was before they took over, they’ve also presided over the share price halving in a relatively short space of time.
Unfortunately the views held by some who posted in this thread were well founded - in an trading update this morning from Animalcare (LON:ANCR)
“Sales growth is expected to be stronger across the Group during the current financial year as the integration of the businesses continues to progress throughout the year. The Company is expected to deliver further incremental growth in underlying EBITDA, underlying net earnings and EPS against 2017 results, maintaining at least double digit growth at these levels. However due to the impact on gross margins of a changing sales mix and competitive pressures, these levels of earnings, whilst still significantly ahead of the prior year, will be below market expectations for 2018.”
Looks like a profit warning to me. I still can’t fathom why Animalcare (LON:ANCR) gave in to this deal, when they were a little gem on their own, doing well.
There will be a time to buy this share, I don’t think that this is the time though!
The old adage comes to mind: turnover/revenue is vanity, profit is sanity....
Without going into the detail wasn't Animalcare badly exposed to Brexit and does this transaction remove that risk?
Even though I've only recently bought some ANCR I've just 'cut & run' and sold (at a small loss) my holdings.
I'd rather be invested in something I have a reasonable level of confidence in rather than this mess of a merge / takeover.
If in the future the new ANCR looks promising then I can always get back in, but for now I'm happier having my money elsewhere.
Hi Guys
I reviewed the admission document this morning as a potential investor with no existing holding. The admission doc has a lot more detailed financial information.
In short, IMO ANCR post takeover is a poorer company than pre. Looks like a win for Ecuphar and the short straw for ANCR.
Here are some standard metrics, pre and post takeover.
- Cash : ANCR £7m ; Post T £0
- net debt : ANCR debt free ; Post T £24m
- Tangible Book Value : ANCR positive ; Post T negative
- Operating margin : ANCR healthy 22% ; Ecuphar 9%
- PE : ANCR 27 ; Post T 30
- EV/ EBITDA : ANCR 19.5 ; Post T 18.1
- FCF/ Sales : ANCR 26% ; Post T 11%
It is very difficult to say what the earnings growth might be post takeover. Ecuphar actually had a bad 2015 FY.
So with a post takeover on a PE of 30 (all calculated on the placing price) and growth prospects unclear, it doesn't look an investible proposition to me.
Please DYOR
Thanks for that summary Ramridge. I found it very useful and it helped confirm my negative view of this transaction.
I'm now a very annoyed ex Animalcare (LON:ANCR) shareholder. I've taken my reduced profit and retreated muttering and cursing.
I hope for the sake of other holders that I'm wrong but I'm moving on to fresh opportunities.
Thanks for the analysis Ram. I looked at it briefly, and came to a similar conclusion. I don't hold, but have had them on the w/list.
Good evening.
I hold Animalcare (LON:ANCR) and upon reading the RNS on Friday emailed the company to express my disappointment at the Placing. My complaints were that the existing shareholders were excluded and were facing substantial dilution.
To the credit of Animalcare I received a reply the same day from Walbrook PR on their behalf. In their reply they acknowledged my concerns but said that the sensitive nature of the deal and limited time constrained them from offering exiting shareholders a chance to participate. This is the standard line as we know but at least they replied.
I also found it interesting that they said the Directors recommended the deal as they, "believe that the increased liquidity and free float will be beneficial to all shareholders, as will the addition a business that will be earnings enhancing in the first full year of ownership."
I remain disappointed that (once again) private investors/existing shareholders have been excluded but will be giving Animalcare (LON:ANCR) the benefit of the doubt for now, holding my shares & will do so until more details are known.
Astongirl, I see no reason to recommend a deal just because it increases free float and liquidity! Walbrook are just there to trot out the standard company line, I've met Leanne there several times as they seem to represent a few of my holdings. But I do not understand why this deal is so time sensitive, for what they are 'buying' is an unquoted company?
If Animalcare (LON:ANCR) continued to grow as they are then the free float would have increased eventually anyway. And why not buy a smaller rival or push more into Europe on their own, instead of giving away the company?
It just does not add up. Animalcare (LON:ANCR) went from being a stable, sensibly run, profitable company into something quite different. It's almost as though the incomings from Ecuphar have some dirt on Iain Menneer and blackmailed him into this deal.
Here's what I wrote on ADVFN:
"I'm out too. It's been a great share but I don't think this deal adds up. I don't like how it's being rushed through - why? Why the massive urgency to buy an unquoted company? I don't like how control is effectively being given to two people I've never heard of. I don't like how they have gone from being in a profitable niche to what seems like massively overpaying for a reverse takeover. And I don't like how private shareholders were locked out of a placing at a large discount. And I don't like how a significant cash balance has been turned into debt (if I read it correctly).
It's a shame because it was a great company and I thought had more promise to come. Best of luck to remaining holders."
Finally, Ram thank you for your analysis, much appreciated.
This looks to me like a way for Ecuphar to acquire Animalcare (LON:ANCR), paid for by diluting the Animalcare shareholders. I'm struggling to see why on earth I would vote for that.
If Ecuphar want to acquire Animalcare, they should make a bid for it.
as a long standing animalcare shareholder I'll be voting against this, and I urge any holders to do the same. This has been a great share, and I don't see why they needed the deal. The size of the transaction and the fact that such a large percentage of the new company ends up in somebody else's hands puts me off. And massively ticked off that the placing was not even open to PIs stinks. I'll be writing to the CEO to express this (not that this will make any difference, as usual the closed city club will gorging themselves at my expense). An immediate 10% drop on re-admission? No thank you.
I don't know what to make of this at all. Animalcare (LON:ANCR) is paying £134.6 million for Ecuphar, and will have 37% of the new co., which will have an initial market cap of £209.7m.
As far as I can tell, the new co should have revenue of approx. £84m and approx. underlying EBITDA of approximately £14m. No idea what the EPS is projected to be, but there might be an estimate in the admission document which should be released today, but possibly Monday.
I'm intrigued, rather than put off, but I definitely want to see more of a financial justification. My initial (cynical) view is that it seems Ecuphar has got the best of this deal with a London listing and a pile of cash.
Chris.
Based on my back of the envelope calculations the combined company post acquisition witll have £8m of underlying earnings once the deal completes. Based on a £210mkt cap post acquisition, and if you adjust for the debt of £24m, post acquisition than you get an EV of £234m. A PAT to EV ratio of almost 30 times, to me doesn't look attractive.
I agree with Cisk's comments that the deal doesn't make sense from an Animalcare (LON:ANCR) shareholder point of view. Existing shareholders are being heavily diluted, there's no potential to participate in the placing and there also seems to be a lot of changes in the board room. I don't hold but if I did I would be voting against it. Sure the combined group will be larger and possibly more resilient, but Animalcare (LON:ANCR) were growing earnings very well, so I don't see the rationale for the reverse takeover.
The announcement is here: http://www.stockopedia.com/share-prices/animalcare-LON:ANCR/news/rns/170623ancr9589i.htm/?title=proposed-acquisition-of-ecuphar-nv-and-placing