In a fairly quiet news flow day today we have had some acquisition, disposal and directors dealing news from a few stocks I have written on in the past. Firstly there is another acquisition and associated rights issue from RPC Group the £2bn rigid plastic container manufacturer which wrote up in detail some time ago and updated on it here.
This latest in a long line of deals from them, which have historically been successful, again looks sensible and given the price, expected synergies of €15m per annum and the financing arrangements looks as though it will be earnings enhancing, like previous deals.
They are paying £470m for GCS Group which is a leading global manufacturer and provider of closures and dispensing systems for consumer products in more than 100 countries worldwide. They are funding this with a mix of cash from a 1 for 5 rights issue at a discounted 460p and debt which is expected to leave their debt at a highish but manageable 2x EBITDA.
In summary on the benefits of the deal they say it will see:
Meanwhile we had a disposal of the national network assets from KCOM the Hull based telecom operator. This has raised £90m for them and pays down most of their debt. I estimate this will be roughly neutral as the £4m net cost of using the network going forward will roughly match the interest cost savings. However as they say it does give them capacity to accelerate investment in their plans to transform the group, without the need for any material increase in debt, while at the same time as providing shareholders with a clear medium term dividend commitment.
The shares had been suspiciously firm in the run up to this and have now moved to the top of their trading range over the last few years where they now also appear over bought in the short term. Thus it will be interesting to see if this deal and perhaps details of their
investment plans can prompt a further re-rating, although I note this is very much like a sale and leaseback deal that a retailer could undertake and as I don't see it enhancing earnings I'm not sure it really changes the story that dramatically. Thus given it is on a fairish looking 14x with limited growth and a low EBIT /EV yield the main attraction remains the 6% or so yield which has been growing strongly but is scheduled to be at least maintained at 6p after the current year as indicated by the Company in their interims recently,
So on that basis I would be tempted to suggest locking in some profits up here, although maybe I could be missing something here. But worth noting if you are in need of income the shares are due to go XD the 1.97p interim on 24th December.
Finally further to the bullish update from S&U which I mentioned on Friday. I note that the Chairman Anthony Coombs backed up his bullish comments with a purchase on Friday of 1,000 S&U Ordinary Shares at £24.05 per share which takes his total beneficial holding to 1,335,027 Ordinary Shares representing 11.2% of the total voting rights of the Company.