Volex makes two rejected bids for TT Electronics

Volex announced on Friday that it has submitted two proposals to acquire the London-listed TT Electronics in a cash-and-shares deal, valuing it at around £249m.

The AIM-traded firm said both proposals were rejected by the TT Electronics board, with no engagement between the two companies.

It said its latest proposal, dated 14 November, comprised 62.9p in cash and 0.223 new Volex shares per TT Electronics share.

Based on Volex's share price at market close on that date, the offer valued TT at 139.6p per share, representing a 76.7% premium to TT Electronics' closing price of 79p and a 73.2% premium to its one-month volume-weighted average price.

Volex said the offer would provide TT Electronics shareholders with an attractive opportunity, combining an immediate partial cash exit with the potential to benefit from a stronger, combined entity.

It highlighted challenges TT Electronics was facing in its operational environment and end markets as a basis for the proposal's appeal.

The company indicated it would include a mix-and-match facility in any formal offer, allowing TT Electronics shareholders to adjust the cash and share proportions of the deal to suit individual preferences.

“We believe that bringing Volex and TT Electronics together in a highly synergistic transaction would create a scaled and diversified leader in the specialist electronics market which would act as a platform for future organic and inorganic growth and significant value creation,” said Volex executive chairman Lord Rothschild.

“Despite the resilience of TT Electronics' underlying business, it has faced persistent challenges in recent years, which Volex believes have been exacerbated by execution missteps by the Board, including former and current executive leadership.

“TT Electronics' shares are trading at a 10-year low.”

Lord Rothschild noted that since 1 January 2018, TT’s share price had declined by 65%, compared to Volex's, which had increased over 300%.

“We firmly believe that our second proposal offers shareholders an extremely compelling alternative to the status quo: the opportunity to in the near term, realise a meaningful element of the offer consideration in cash whilst operational challenges persist, and alongside our own shareholders, to participate in the highly attractive upsides offered by the growth qualities and synergy potential of the combined business led by an experienced team that has a track record of successfully delivering value accretive acquisitions.

“I therefore strongly encourage TT Electronics shareholders to urge the TT Electronics board to engage with Volex in delivering an expeditious and highly attractive outcome for all stakeholders.”

At 0833 GMT, shares in TT Electronics were up 39.08% at 109.88p, while those in Volex were down 10.48% at 307.5p.

Reporting by Josh White for Sharecast.com.