Berenberg ups bid target Signature Aviation to 'hold'

The broker downgraded Signature to 'sell' in May 2020 based on gloomy prospects for business jet activity, the economy and dividends. These risks remain but it now looks like Signature will be bought with three parties interested.

Berenberg upgraded Signature to 'hold' with a price target of 405p reflecting Global Infrastructure's offer price. Analyst Eoghan Reid noted that private equity groups Blackstone, working with Bill Gates's Cascade Investment, and Carlyle are also sizing up Signature and could lodge counterbids.

Reid said Global Infrastructure's bid was surprisingly high, representing a 35% premium to Signature's historical enterprise value-to-earnings valuation or 66% more than the price-to-equity average over five years. It also "vastly exceeds" the multiple Signature paid in 2016 to buy Landmark Aviation from Carlyle, Reid said.

Signature shares closed at 430p on Tuesday - 6% more than Global Infrastructure's offer.

"This suggests that investors expect a counterbid from either the Blackstone/Cascade consortium or Carlyle, or even a yet-unannounced fourth bidder," Reid wrote in a note to clients.