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City News: Brandon ‘in play’ Catherine Stratton is quick off the mark with news of a possible MBO at Brandon. The announcement that Brandon Hire’s Chief Executive Charles Skinner and Finance Director Chris Sims are investigating the possibility of mounting a management buy out at the company came in response to a 10p rise in the company’s share price on 29 December and pushed the shares up a further 10.5p to 173.5p before the Stock Market closed for the New Year. Chairman John Laycock holds 8,000,000 shares representing approximately 23% of Brandon’s issued share capital; the two executive directors leading the MBO had a total of 540,861 shares on 22 February 2005. Chris Sims stresses that their plans are still in the very early stages and that the announcement was precipitated by the movement in the share price. This potential purchase will undoubtedly draw attention to the strength of the Brandon depot network and it would be surprising if it does not flush out other potential bidders for the company. Both Speedy and Vp had been interested in acquiring Brandon in the past, but that was when the company was a strong regional player - primarily in the south west of England. Over the past two years, it has established a national presence and it could be less attractive to the other national players, if they felt that there were too many duplications with their own locations. On the other hand, the rest of the leading tool hirers will each be reluctant to see Brandon pass into the hands of a competitor. Of course, it is also possible that others outside mainstream tool hire will be interested. Thus early 2006 may see a significant move in the consolidation of the hire industry. It is likely that to succeed a bidder will have to pay a premium of at least 10% to the present price, perhaps somewhere between 190p and 200p per share, which would value the company at about £66m. • The increasing strength of Ashtead’s shares largely reflects the growth of its US subsidiary Sunbelt, which accounted for over 70% of group turnover and 76% of EBITDA (earnings before interest, taxation, depreciation and amortisation), as confirmed in the December announcement of its half year results. In the UK, A-Plant is still struggling to return to a growth path; revenues declined by just over 1% on a fleet 2% smaller. Before the results, there had been press speculation about the company’s search for a successor to George Burnett, who is approaching retirement. With the US operations now dominant, it seems probable that the Group will look across the Atlantic for a replacement, which could have interesting implications for the UK hire market. • Executive Hire News › Archives › January 2006 › City News › Brandon 'in play'
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