A Texan investment company called Cathexis has launched a bid to buy contractor ISG, after the latter issued a profits warning earlier this month predicting that its construction division was heading for a loss in the first half of 2016.
Earlier this year, its results revealed a loss of £28m in the year ended 30 June on revenue of £1.6bn. ISG’s woes have also included a profit warning in February 2014.
The company, Cathexis, had already built a 29.5% stake in the company in recent years, and has now launched a bid to buy all the shares, offering 143p a share, valuing the offer at £70.8m.
Yesterday, ISG’s shares closed at 122p, with the bid representing a premium of 17.2% to current value.
The move fulfils a prediction made in Construction Manager earlier this year, when Phil McCreanor, head of UK M&A at global investment bank Lincoln International, argued that both construction businesses and private equity firms in the USA were interested in doing deals in the UK construction sector.
In the article McCreanor said that "exceedingly favourable conditions in the UK have created a strong outlook for M&A within construction."
Construction Enquirer reports that Cathexis issued a statement this morning saying that taking ISG private would allow it to reduce the inherent risks falling on the construction business which was prone to extraordinary losses from time to time.
Cathexis suggested there would be few changes at the top if shareholders accept, adding that it attached “great importance to the skills, expertise and knowledge of the existing management and employees of ISG”.
The firm said it would conduct with management a strategic and operational review of the existing resources of ISG to identify opportunities.
Cathexis Group apparently first approached the ISG board in June, but its offer was rejected at the time. But following the profit warning, it has decided to appeal directly to ISG shareholders.
Cathexis said it had no plan to change the location of ISG’s places of business or to redeploy employees.
