British engineering firm Kentz rejects takeover offers

LONDON Mon Aug 19, 2013 6:40am EDT

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LONDON (Reuters) - British engineering firm Kentz KENZ.L said on Monday it had rejected takeover approaches from larger London-listed rival AMEC (AMEC.L) and Germany's M+W Group, saying both undervalued the company.

In the start of what investors and analysts say could become a bidding war involving a number of parties, AMEC and M+W confirmed they had made offers for Kentz.

AMEC offered 565-580 pence per share on August 5, compared with Friday's closing price of 476 pence.

Kentz, a specialist construction company focused on oil and gas, mining and infrastructure, said the M+W offer was lower than the one from AMEC, and both had been unanimously rejected by the board.

The offer from AMEC, which provides services and equipment for the oil and gas, mining, nuclear and renewable energy sectors, valued Kentz at around 680 million pounds, compared to a market cap of 561 million pounds before news of the offer.

Kentz stock opened up 25 percent taking it beyond the offer. They were up 22.3 percent at 581.64 pence as of 0633 ET.

Kentz, a FTSE 250 company, has grown rapidly since listing in 2008. Recent contract awards include building parts of the Nacala rail and port project in Mozambique and the Ichthys LNG project in Darwin, Australia.

Its global reach and construction focus make it an attractive target for engineering companies looking to expand their service offerings, according to analysts.

"Now that Kentz has emerged as a target we think a competitive bidding war could evolve," David Thomas, analyst at Credit Suisse, said in a note.

AMEC previously said it was looking to make acquisitions in the oil and gas sector, adding that if no deals were forthcoming it would consider a cash return for shareholders in the fourth quarter.

However, a bidding war makes it less likely that AMEC will go through with a deal, according to Credit Suisse's Thomas, with chief executive Samir Brikho preferring to do his deals behind closed doors.

A top 20 shareholder in Kentz told Reuters a deal would have to take place at a significantly higher price.

"I'm quite sure there'll be others interested... We'd have to see a very decent premium and we'll look to see what management have to say," the source said.

(Editing by Kate Holton and Jason Neely)

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