Matt Peltz, the son of billionaire activist investor Nelson Peltz, has called on FTSE 100 testing firm Intertek to accept the latest £10bn offer by Swedish private equity firm EQT, as investors clash over whether the board should sell up.
EQT's Fourth Offer
The buyout firm submitted its fourth offer on Tuesday morning, valuing shares at £60 for a total £10.6bn package including debt, causing Intertek's share price to jump more than five per cent to 5,242p. EQT stated that the final proposal delivers certain and accelerated cash value at a full valuation for Intertek shareholders, superior to the range of outcomes associated with Intertek's standalone prospects.
Intertek provides testing and assurance services for companies worldwide and commands a market value of around £7.8bn. The firm has not yet confirmed whether it would reject EQT for a fourth time, assuring shareholders it is reviewing the offer and saying there is no certainty that a formal bid would be made.
Shareholder Pressure
Lost Coast Collective, a fund which owns roughly 1.2 per cent of Intertek, wrote to the firm's board following the latest offer, calling on it to engage with EQT. The fund, managed by Peltz's son Matt, told Intertek: 'The market has spoken. This management team and Board have had their chance – over the last 11 years and during the last month. It is time to recognize the merits of EQT's proposal and engage in good faith to complete a transaction.'
Peltz, who built his £88m stake in the testing firm last month, said the market is skeptical that the board is capable of lifting Intertek out of the hole it finds itself in.
The fourth bid came after activist investors Primestone and Palliser both urged Intertek's board to engage with the Swedes, in signs a shareholder revolt over its stance could be brewing.
Board Resistance
Other major shareholders in the quality assurance business had commended its board for blocking three successive bids by EQT, claiming their £59 per share offer undervalues the company. But Primestone, which owns around 0.5 per cent of Intertek, had written to its board urging the firm to engage constructively with EQT.
Intertek rejected EQT's third offer on Friday, which valued the firm at £8.9bn or £10.3bn including debt. The board stated it had carefully reviewed the further revised proposal with its advisers and unanimously concluded that it significantly undervalues Intertek and its future prospects, with significant execution risk given its conditional nature.
Divergent Views
A number of key shareholders called on Intertek to hold firm over the weekend, urging it to resist any further approaches. Intertek is due to demerge its energy and infrastructure division, and a pair of funds which account for close to £300m of the firm's value said EQT's offers fail to recognize the value that will be added by this spin-off.
But Primestone claimed the £59 per share offer does not undervalue the firm, instead offering a 55 per cent premium on the company's undisturbed share price.
Criticism of Governance
The fund 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. Primestone said it is concerned about Intertek's fragile governance: 'We are troubled by the concentration of influence at the executive level, precisely at the moment when independent Board oversight matters most.'
The fund suggested the board is refusing to engage with EQT because its financial interests do not seem aligned with its shareholders, as its members' shares in Intertek are worth less than their annual fees. Primestone 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.
