HSBC downgrades Premier Farnell as it lifts target price to reflect Daetwyler offer

HSBC downgraded Premier Farnell to ‘hold’ from ‘buy’ as it lifted the price target from 145p to 165p, which is the price Swiss conglomerate Daetwyler is paying per share to buy the technology company.

With the new target price now implying 0.3% upside, the bank has decided to downgrade its recommendation.

It said that while a competing bid cannot be ruled out, it’s unlikely as trading conditions for Premier Farnell remain challenging and the offer price represented a premium of 51% to its previous closing price.

HSBC said the offer values the entire share capital of Premier at around £615m, with an enterprise value of £792m.

“On this basis, the offer puts PFL on a FY 2016a (last reported) valuation of 15x on price-to-earnings, 0.8x EV/sales and 11x EV/EBITA.

“Given that PFL had been affected by challenging trading conditions and increased competition, mainly in North America and the UK, the combination with Daetwyler group would be a good strategic choice, in our opinion.”

At 1045 BST, Premier Farnell shares were up 0.2% to 164.75p.