HomeServe shares jump 15% after home improvements group reveals takeover bids and extends offer deadline
- HomeServe shares were the second-highest riser on the FTSE 250 Index
- Brookfield is one of the planet’s largest alternative investment managers
- The online tradespeople directory Checkatrade is owned by HomeServe
HomeServe shares soared on Friday after the home improvements firm confirmed it had been approached over a possible takeover bid.
Last month the company acknowledged that it had been the subject of interest from private equity group Brookfield, one of the world’s largest alternative investment managers with around $690billion in assets.
Since that time, it has received a number of conditional offers from the Canadian financial giant, which its board has ‘carefully considered.’
Boom: HomeServe has been a significant beneficiary of the Covid-19 pandemic as lockdown rules made people spend more time indoors and reliant on home repair services
Brookfield had been given until 5pm yesterday by the City Takeover Panel to either declare a potential offer for HomeServe or walk away, but that deadline has now been extended to 19 May.
Following the announcement, HomeServe shares climbed 14.6 per cent to £9.78 by late Friday afternoon, making it the second-highest riser on the mid-cap FTSE 250 Index.
Headquartered in the West Midlands town of Walsall, HomeServe has been a significant beneficiary of the coronavirus pandemic.
Lockdown encouraged many to engage in home renovation, as did the extra savings built up by consumers and the stamp duty holiday that the UK Government introduced in the summer of 2020.
For the 2021 financial year, HomeServe’s revenues rose 15 per cent year-on-year to £1.3billion, mainly due to sales in its American market increasing by a fifth, although pre-tax profits dived by two-thirds.
Demand for its services has continued to be strong, with its most recent trading update stating it had made ‘very good progress’ in the last fiscal year.
Growth: For the 2021 financial year, HomeServe’s revenues rose 15 per cent year-on-year to £1.3billion, mainly due to sales in its American market increasing by a fifth
The firm said its home experts division had posted its first-ever profit on a 12-month basis thanks to an exceptional performance by its Checkatrade subsidiary, where the level of paying trades jumped to 47,000, and average revenue per trade rose to £1,200.
Alongside this, HomeServe revealed there had been greater retention rates in its North American heating, ventilation, and air conditioning business, as well as a boost in affinity partner households.
Recently, it launched ‘HVAC As A Service’ following a trial in New York State that allows patrons to get heating and air conditioning replacements, plus a yearly tune-up and breakdown cover in return for a monthly payment.
Apart from the UK and the United States, the firm has operations in France, Spain, and Japan, where it has a joint venture with Mitsubishi Corporation, the country’s largest trading company.
Aside from partnerships, HomeServe has been expanding through a series of acquisitions, including the British home emergency assistance group CET Structures, which it purchased last October for £53million.
Yet despite the large growth in business, the firm’s share price has plunged by 20 per cent in the past two years.
Andrew Brooke and Karl Green, analysts at RBC Europe, believe HomeServe’s current stock price is ‘too inexpensive,’ given that they expect the company to report decent full-year results next month.
They added: ‘We can see the attraction of taking the business private and investing for growth behind closed doors, especially for founder, CEO and largest shareholder Richard Harpin.
‘This would be a shame in our view but is reflective of the current way the UK market is valuing stocks – stocks that have opportunities to invest for long-term growth seem to get penalized, whilst those that buy back stock at high valuations get applauded .’