Activist investor Primestone Capital has urged the board of FTSE 100 testing firm Intertek to engage with a takeover offer from Swedish private equity giant EQT, signaling a potential shareholder revolt over its stance. Other major shareholders had commended the board for blocking three successive bids by EQT, claiming their £59 per share offer undervalues the company.
Intertek's Share Price Rises
Intertek's share price jumped nearly five percent on Tuesday's open to 5,206p, indicating investor support for the board's refusal to be bought. However, Primestone, which owns around 0.5 percent of Intertek, has written to the board urging it to “engage constructively” with EQT. Intertek provides testing and assurance services globally and commands a market value of around £7.8 billion.
Third Offer Rejected
The latest offer from EQT came on Friday, valuing the firm at £8.9 billion, or £10.3 billion including debt, but was rejected. The board stated it had carefully reviewed the proposal and unanimously concluded it significantly undervalues Intertek and its future prospects, citing execution risk given its conditional nature. Several key shareholders called on Intertek to hold firm over the weekend, urging it to resist further approaches.
Intertek is due to demerge its energy and infrastructure division, and two funds accounting for close to £300 million of the firm's value said EQT's offers fail to recognize the value from this spin-off. But Primestone claimed the latest £59 per share offer does not undervalue the firm, instead offering a 55 percent premium on the company's “undisturbed share price.”
Investor Criticizes Board
Primestone took aim at Intertek's chief executive André Lacroix, saying the offer represents more shareholder value creation than the company has achieved over the last 11 years since his appointment. The fund expressed concern about Intertek's “fragile” governance, stating: “We are troubled by the concentration of influence at the executive level, precisely at the moment when independent Board oversight matters most.”
Primestone suggested the board is refusing to engage with EQT because its financial interests do not seem aligned with shareholders, as its members' shares in Intertek are worth less than their annual fees. The fund wrote: “We believe the Board and Mr Lacroix have a unique opportunity to cap their tenure by delivering an attractive windfall to shareholders, cementing a positive legacy. Conversely, a continued failure to engage will create the perception that Intertek's Board is entrenched and disconnected from its shareholders.”
Intertek declined to comment.
