* Raises bid for Enerflex to C$14.25/unit
* Says Enerflex board supports offer (Adds details, analysts’ comments, updates stock movements)
By Koustav Samanta
BANGALORE, Dec 18 (Reuters) - Toromont Industries Ltd (TIH.TO) said it reached an agreement to acquire Enerflex Systems Income Fund EFX_u.TO after raising its earlier bid by more than 5 percent, ending a month-long hostile takeover for the supplier of equipments to the oil and gas industry.
Toromont’s sweetened offer of C$14.25 per unit values Enerflex at C$631 million ($590.8 million) and represents a premium of 2 percent to the company’s Thursday closing price.
FirstEnergy Capital analyst Kevin Lo said the combination between Toromont and Enerflex makes sense, not just on a financial basis but also because of the strategic fit between the companies.
“Enerflex has a very good business internationally and very little in the U.S. — Tormont has a large share of business in the U.S. but nothing internationally. So the combination actually makes sense and they will be a powerhouse in terms of compression processing capabilities on a wide scale,” Lo told Reuters.
In October, Toromont offered to buy Enerflex Systems for C$597 million, or C$13.50 per unit, after friendly talks for a deal with the company collapsed. [ID:nN16370692]
Earlier this month, Enerflex urged its unitholders to reject the bid as it undervalued the company, and said it got expressions of interest from third parties. [ID:nN12405147] [ID:nBNG434022]
Under a support agreement, which commits about 45.2 percent of Enerflex outstanding units to the transaction, Enerflex retains the right to consider superior proposals from other parties in certain circumstances, and Toromont has the right to match any offer made by another party.
Toromont, which sells, rents and services a broad range of Caterpillar heavy construction and industrial equipment, and makes and installs compression systems, said it would get a C$24 million fee from Enerflex, under certain circumstances, if the offer is not completed.
If the transaction goes in place, “Toromont’s gas compression segment would increase from about 50 percent of sales currently to two-thirds, and that is the higher growth area of their business. So it makes their growth profile more attractive in the long run,” Genuity Capital Markets analyst Neil Forster said.
In a statement on Friday, Toromont said Enerflex, which has unanimously agreed to the revised bid, has recommended that holders tender their units to the offer.
“Toromont’s enhanced offer provides attractive value to Enerflex unitholders, as well as the opportunity to participate in the expected growth,” Enerflex Chairman P. John Aldred said in a statement.
Under the revised offer, Enerflex holders may choose to receive either C$14.25 in cash, or 0.5382 of Toromont common share plus 5 Canadian cents in cash per unit.
Analyst Forster said Tormont’s value will be increased if the positive sentiments continue to return to the natural gas markets as gas prices seem to be recovering a little bit from the lows.
Toromont shares were down 47 Canadian cents at C$26.10, while Enerflex units were up 22 Canadian cents at C$14.20 Friday afternoon on the Toronto Stock Exchange. ($1=1.068 Canadian Dollar) (Editing by Deepak Kannan, Jarshad Kakkrakandy)