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Abbey Protection – a lowball bid offer


Abbey Protection (ABB) is an AIM listed insurance company with a current market cap of £115m. The shares have traded between 116p to 122p in the last two months, with a reasonable volume for an AIM company. But yesterday the directors announced a recommended cash offer of 115p per share for the company from Markel Corporation.

This is a very unusual situation because usually there is a “bid premium” for control of a company. The market price was presumably what willing buyers were willing to pay to willing sellers for shares that gave no influence over the affairs of the company, and control is usually considered to imply a premium of 10% or more.

Needless to say that the share price immediately slumped to the offer price and some shareholders have already expressed their dismay at these events. Unfortunately the directors and management hold over 55% and Markel already has the committed support of 67% of shareholders to accept the offer. The explanation given in the offer document for the sale is that the senior executive team wished to sell their shares, the company had undertaken a sale process and the offer from Markel seemed attractive. It gave no details of any other offers received or the sale process.

The historic exit p/e is 14.5, but this is a company with improving financial numbers and the forecast p/e is only 13.9. Dividend yield was already 4.0% and forecast to rise substantially.

One has to ask whether it would not have been possible to give the Directors an alternative exit for their shares if they were keen to sell.

Shareholders in the company are urged to make sure they vote at the meetings to approve this offer (it will be a “scheme of arrangement”) and should question the directors on why they are so keen to sell at this price and the sale process followed.

Roger Lawson

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