RBC downgrades Premier Farnell, says Daetwyler deal looks a good price

RBC Capital Markets downgraded electronic component distributor Premier Farnell to ‘sector perform’ from ‘outperform’ but lifted the target price to 165p from 155p following its agreement to be bought by Swiss-based Daetwyler Holding AG for 165p per share.

“Given our view that this is a fair price, we downgrade to sector perform and increase our target price to 165p, in line with the offer.”

RBC said that given weak trading, historic issues, management change and gross margin pressures, this is a good price, but it wouldn't rule out a counterbid.

The bank said the new rating reflects its belief that the 165p per share offer from Daetwyler will go through.

“Out with the offer, the operational review underpins short-term forecasts, via better cost savings and potentially puts the group on a more even keel. The Akron Brass sale also aids the balance sheet.”

As far as the company’s first-quarter update is concerned, RBC noted organic revenue growth trends are mixed, but despite showing positive momentum in Q1, this has stalled.

Europe has slowed but is steady, while the UK and US remain weak, and Asia is the standout.

“Any signs of further improvement in the US and UK operations would likely provide a real boost to the stock, albeit we keep a cautious view on 2017E.”

At 1207 BST, Premier Farnell shares were up 50% to 164.10p.