CTH.L Share News (CTH)

(Sharecast News) - Social care services group CareTech has agreed to buy rival Cambian for either 190p per share in cash or 100p per share in cash and 0.267 shares.The offer values Cambian at around £372m on a fully diluted basis and £289m on an enterprise value basis. It represents a premium of approximately 35% to Cambian's closing price on 9 July and 17% to the 90 trading day volume-weighted average price.CareTech said the deal offers a unique opportunity for investors to enhance exposure to the growing UK market for social care services for children and adults and an opportunity to unlock significant value through a compelling strategic fit, tangible near-term synergies and enhanced trading liquidity.CareTech has identified recurring pre-tax cost synergies of around £6m a year, with approximately £3m to be realised in the financial year ending 30 September 2019, £5m in the year to 30 September 2020 and the full £6m in the year ending 30 September 2021. CareTech's executive chairman Farouq Sheikh said: "We are delighted to announce this recommended offer for Cambian. CareTech and Cambian are highly complementary and the combination of the two businesses will create the opportunity to improve outcomes for existing and future service users, to better serve care commissioners, to enhance opportunities for staff and to drive the focus on quality."The financial rationale for the transaction is compelling in its potential to generate value for both CareTech shareholders and Cambian shareholders. At the same time, the larger size of the enlarged group means that more funds will be made available to the CareTech Charitable Foundation to accelerate its important work in giving back to the most disadvantaged communities."Cambian chairman Christopher Kemball said that the deal represents an attractive proposition for its shareholders and broader stakeholders."Like Cambian, CareTech has an excellent reputation for the quality of its specialist education and behavioural health services as evidenced by CQC and Ofsted ratings ahead of sector averages. This should ensure that the children currently in Cambian's care will be well cared for. Furthermore, like Cambian, CareTech promotes employee development and will continue promoting staff continuity in the enlarged group."Liberum lifted Cambian to 'buy' from 'hold' on the back of the news."Given the overwhelming shareholder support for the deal we view completion as highly likely albeit we do think the fair value for Cambian is above the price agreed today. That said, for those shareholders that elect to take the cash and shares option, we think the new combined entity will be very attractively positioned with a high quality management team and plenty of scope for additional cost savings."At 0930 BST, CareTech shares were up 0.7% to 377p and Cambian was up 1.8% to 194p.