A fresh twist on Inmarsat takeover speculation helped propel the satellite operator sharply higher on Friday.
RBC refreshed its longstanding theory that Inmarsat is a bid target with an argument that private equity funds could be interested.
“Now could be the perfect time to take Inmarsat private,” the broker told clients. “Our leveraged buyout model suggests an internal rate of return of around 60 per cent on undemanding assumptions.”
The buyout makes sense now because Inmarsat’s enterprise value is near a 10-year low versus earnings, which reflect an estimated $70m of start-up losses at its in-flight broadband business that will swing into a $44m profit after five years, so the exit should be highly profitable, RBC argued.
Its team also highlighted a long history of private equity involvement in the satellite industry, whose high barriers to entry and strong cash generation appeals to buyout funds, as well as recent share purchases by Inmarsat management.
RBC last year championed the idea that Inmarsat would be a good fit for Dish Network, the US pay-TV broadcaster, or its sister company EchoStar. The shares, which are down 25 per cent over the past 12 months, bounced 4.9 per cent to 528.8p.
The wider market shrugged off sterling strength to send the FTSE 100 to another record high, up 15.7 points, or 0.2 per cent, to 7,778.64.
Engineer GKN alone contributed 6 points to the FTSE in news that it rejected a bid approach from Melrose in favour of pursuing its own break-up plan under a new chief executive. GKN closed 26.2 per cent higher at 420p and Melrose took on 5.8 per cent at 227.5p.
IWG, the owner of Regus serviced offices, edged 1 per cent higher to 264.3p amid market rumours of a second takeover offer.
Brookfield Asset Management and Onex last year made a non-binding indicative proposal to buy IWG for a rumoured 270p per share, and face a Takeover Panel deadline of January 20 to firm up the offer or walk away.
Analysts have speculated that the Brookfield consortium will need to raise its offer closer to 300p a share to gain the co-operation of IWG’s founder and key shareholder Mark Dixon.
Transport café operator SSP, a recent underperformer on worries about UK air and rail passenger volumes, bounced 5.4 per cent to 663p after JPMorgan Cazenove said the worries were overplayed. It turned positive on valuation grounds with a 765p target.
An upbeat trading statement meant B&M climbed 5.1 per cent to 417p, even after pre-float investor Clayton, Dubilier & Rice unloaded 49.1m shares in the retailer at 407p apiece.
Boohoo.com lost 4.6 per cent to 182.7p following a share sale by Jalaludin Kamani of the group’s founding family.
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