The Skilled Group (SKE) – Programmed Maintenance Services (PRG) agreed merger will happen after six months of off and on talks.
Combing the two companies will create a company valued at (initially) $750 million and ready to take on larger rivals such as Transfield Services (TSE) and UGL (UGL).
It values the Skilled at around $422 million, with Programmed’s market capitalisation at $332 million prior to a trading halt on Monday.
Skilled will enter into a Scheme Implementation Agreement that will see shareholders offered 25 cents and 0.55 Programmed shares for every Skilled share they own.
Once the takeover is complete, Skilled shareholders will own 52.4% of the combined company.
The offer values Skilled shares at $1.79 per share, making the deal worth $652 million.
That’s a 45% premium compared to the $1.23 Skilled shares were trading at on May 22, prior to the announcement that the two companies had re-entered into takeover discussions. The talks had been abandoned after an initial approach from Programmed to Skilled in January of this year foundered on a lower than wanted offer price.
Skilled shares rose more than 11% at one stage yesterday and closed up 7.5% at $1.655.
That’s well under the $1.79 a share offer, but investors have concluded there is no one else in the running in the bid, or capable of extracting any cost savings from two companies in roughly the same (and complementary areas of business).
Programmed shares rose 1.7% to $2.85 as investors viewed the deal as positive for the company.
The merger is expected to lead to cost savings of more than $20 million in the first year, though the cost of integrating the two companies is expected to be $17 million over three years.
Programmed chief executive Chris Sutherland said in May that a merger would create a more efficient and flexible combined entity that is able to take on larger projects.
The merged company will be run by Programmed chief executive Chris Sutherland, with Skilled chief executive Angus McKay to depart after just six months at the helm.
