British high-tech engineering firm Renishaw PLC (RNSHF), which was founded in 1973 and publicly listed in 1984, manufactures precision measurement equipment used in electronics manufacturing applications. The company’s technology has been used for many different additive manufacturing applications, including healthcare, heat exchangers, aircraft wings, wind turbines, and more, and it seems that things are going pretty well for Renishaw, as shares in the company have nearly doubled in value over the past year; this shows a strong recovery, even in spite of the COVID-19 lockdowns. Shares in the company recently shot up to more than 18%… right after its two founders told the board of directors that they plan to sell their majority stake in Renishaw.
Together, Renishaw chairman David McMurtry, who stepped down as the company’s CEO in 2018, and non-executive chairman John Deer own 53% of the company. Both men are in their 80s, and are looking to make sure that their FTSE 250 company has a strong future before letting go.
McMurtry and Deer said in a joint statement, “Now finding ourselves in our 80s, our thoughts have increasingly turned to considering the future of our shareholdings in the company and how we can actively contribute to securing the future success of the business.”
The two have held this large stake in the company for decades, and now that they’ve decided to sell it, the Renishaw board is following suit and beginning a formal sale process of the company, hiring UBS to look for an appropriate buyer. Investors clearly approve of the decision, as shares in the company shot up over 18% to £68.60 last week in London trading, which puts the value of Renishaw at nearly £5 billion ($7 billion).
Analysts with AJ Bell noted that shares in Renishaw “already command a high valuation,” so a potential buyer should be prepared to shell out a lot of money to purchase the firm.
The analysts said, “One could imagine an Asian company would be interested in owning Renishaw, but such a buyer may have different views on whose culture should prevail.”
However, this doesn’t necessarily mean that Renishaw will be sold. Often, looking for potential buyers is just normal part of a company’s restructuring process when change is coming—all options are weighed, including selling, and so far, Renishaw has not received any offers for the company, despite announcing that it was looking for one. So, the firm could still change its mind at any point.
In terms of a preferred buyer if Renishaw is sold, the company’s board said it’s looking for one that will “respect the unique heritage and culture of the business, its commitment to the local communities in which its operations are based, and who will enable the Company to continue to prosper in the long-term.”
The AJ Bell analysts did note that, if Renishaw is purchased and subsequently removed from the London Stock Exchange, it would be a major blow to the UK market, which they said is “battling an identity problem with critics saying it lacks exciting companies at the cutting edge of technology and science, particularly among larger cap stocks.” The UK government announced in the fall that it isn’t letting the country’s companies go without a fight if national security is at risk due to foreign takeovers, and under the National Security and Investment Bill, companies must notify the government about suggested deals in over 15 strategically important sectors, including AI, communications, energy, defense, transport, and more.
Hargreaves Lansdown analysts think that the company is looking for a buyer that will commit to the communities in which it operates, which, for Renishaw, includes the U.S., Ireland, Germany and India.
However, they did also state, “But as we’ve seen in previous takeovers in the past, pledges can be reneged on…Despite best intentions there is always a risk that could happen which is likely to mean there will be a highly concerted effort to find the right buyer at the right price.”
So, will we see Renishaw on the next edition of our Dream Mergers & Acquisitions series? Time will tell!
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