Takeover/Book Value 500p15 Sep 2017 11:38
The latest in terms of City rumours regarding UK energy production company and underperformer Drax, is not only intriguing in itself, but may offer good news which could affect former star fund manager Neil Woodford.
After his summer horribilis a takeover for Drax could improve his lowly batting average of late, and do a little to improve his tarnished reputation. He is a major shareholder here, along with Schroders and Invesco, and will be hoping that the “dog” Drax finally has its day, and its value unlocked.
Clean And Mean
Fans of Drax (admittedly not a big contingent) will have been delighted today to hear that the group is to convert its remaining two coal fired climate change inducing power stations to gas, as if this move might prevent global warming.
But the spin from in and around the company is that it is remodelling itself into a clean, green corporate machine. While we may take this with a pinch of salt, the new look is apparently attracting M&A attention from parties as diverse as the Chinese Government, GDF Suez and RWE to name a few.
Massive NAV Discount
Underpinning the idea of tucking away some Drax shares with or without the alleged interested parties, is the way that the NAV of the company is up at 460p even before the latest turnaround moves.The company is already on the M&A radar of Credit Suisse
This compares with the present share price of 315p, a sharp contrast to the 800p plus only last year. The implication of the NAV value is that even a lowball takeover here of 500p – the present City rumour, would do very nicely for bottom fishers entering the fray at present levels.
Red Alert
Given the significant undervalue of the company, its advisors are said to be on red alert against a potential offer, putting a defence strategy in place for both friendly or hostile approaches.
https://wallstreetwires.com/drax-takeover-save-woodfords-reputation/
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