TT Electronics PLC has rejected takeover bids from Volex PLC, citing that the offers do not reflect its true value or growth prospects. An all-cash proposal from an unnamed third party was also turned down, though it was more lucrative than Volex’s. Following the news, TT’s share price rose significantly, while Volex’s shares fell. Volex’s executive chairman believes merging the companies would foster growth, despite TT’s recent financial challenges and a revised profit forecast for 2024.
TT Electronics Rejects Volex Takeover Proposals
TT Electronics PLC has officially announced that it has turned down a takeover offer from Volex PLC, alongside a more lucrative proposal from another unnamed third party. The electronic components manufacturer, located in Woking, Surrey, emphasized that the unsolicited bid from Volex did not accurately reflect its intrinsic value or future growth potential.
In addition, TT disclosed that it had also dismissed an all-cash indicative offer from a mysterious entity, which was notably higher than the offer made by Volex, a company based in Basingstoke, Hampshire, known for its integrated manufacturing of critical power and data transmission products.
Shareholder Guidance and Future Outlook
TT Electronics has urged its shareholders to refrain from taking any action, while reiterating that there are currently no negotiations ongoing with the third party. As per the takeover regulations, Volex is required to announce its intentions regarding an offer by 5 PM on December 13.
Earlier in the day, Volex revealed it had made two offers for TT Electronics, both of which were rejected by the board. The first proposal valued TT shares at 129.0 pence, comprising 62.9 pence in cash and 0.203 new Volex shares for each share of TT. The second offer increased the valuation to 135.5 pence, which, based on Volex’s latest closing price, equated to an implied value of 139.6 pence—representing a significant 77% premium over TT’s Thursday closing price of 79.0 pence. This offer included 62.9 pence in cash along with 0.223 Volex shares for each TT share, totaling a valuation of £248.6 million for TT.
Following these developments, TT’s share price surged by 40% to 110.32 pence, while Volex’s shares experienced an 11% decline, settling at 305.00 pence. Volex characterized its proposal as an appealing opportunity for TT shareholders but noted the board’s unwillingness to engage in discussions.
Nat Rothschild, the executive chairman of Volex, expressed confidence that merging Volex and TT Electronics would create a powerful entity in the specialized electronics sector, paving the way for both organic growth and value creation.
Volex’s interest in acquiring TT came shortly after TT released an update regarding its results and announced the planned retirement of its long-serving CFO, Mark Hoad, in September of the following year. TT’s financial performance showed a slight 1% decline in organic revenue for the four months leading up to October 26, due to contrasting growth rates in different regions.
Despite strong growth in Europe and Asia, TT faced a challenging environment in North America, influenced by previously reported operational issues and a sluggish component market. Consequently, TT has revised its adjusted operating profit forecast for 2024, anticipating a decrease to the lower end of the previously indicated range of £37 million to £42 million, down from £52.8 million in 2023.
In a related development, Volex also disclosed its half-year results, showcasing a 30% increase in revenue to $518.2 million, thanks to substantial growth in its Electric Vehicles and Consumer Power divisions. Pre-tax profit rose by 21%, highlighting the effectiveness of Volex’s resource management and cost-control strategies. The company also announced a 7.1% hike in its interim dividend, reflecting its robust performance and optimistic outlook for the fiscal year 2025.
Executive chairman Nat Rothschild commented on the strong performance, asserting that their strategic approach is yielding positive results and reinforcing their commitment to maintaining high standards across all projects.