Companies roundup: Anglo, BHP and WH Smith

Anglo American (AAL) has been one of the best performers in the mining sector in the past 12 months as investors bet on both its own restructuring and also BHP (BHP) coming back with another bid. A Financial Times story over the weekend puts some cold water on the second driver – sources within BHP say Anglo’s share price is beyond what the company would pay now. The shares dropped 6 per cent on Monday in response. 

Anglo announced progress in its move to spin off the De Beers diamond division last week with the signing of a new deal with the Botswana government. This means a sale or spin-off listing can progress. AH

WH Smith’s high street business on the block

WH Smith (SMWH) confirmed weekend reports that it is mulling the sale of its 500-strong UK high street chain to focus on its travel hub business.

The retailer said that it was “exploring potential strategic options for this profitable and cash-generative part of the group, including a possible sale”.

WH Smith was started from a single store in London in 1792. Although the high street business still employs about 5,000 people, over the past decade it has become a “focused global travel retailer”, with more than 1,200 stores in 32 countries. The travel business now generates 85 per cent of trading profit, the retailer added.

Interested parties include retail-focused private equity investor Alteri and turnaround specialist Hilco, according to the Financial Times.

However, any prospective buyer of the high street business would face “a challenging climate to operate in”, according to Nicholas Found, head of commercial content at Retail Economics.

WH Smith’s shares were up 3 per cent in early trading. Although a sale would likely be dilutive to earnings (as a bidder would be unlikely to pay the 8.6-times enterprise value to Ebitda multiple the wider group is valued at), it could lead to a higher multiple being applied to the remaining business, given its faster growth rate, said Investec analyst Kate Calvert. MF

Good Energy agrees £99mn takeover 

Renewable energy specialist Good Energy (GOOD), which readers might recognise from our high-quality small caps screen has finally managed a deal with Abu Dhabi’s Esyasoft months after the first offer was tabled. The all-cash deal values Good Energy at £99mn, or 490p a share. This is up from the initial 412p a share bid in October. The company sells renewable electricity to households and also installs heat pumps and solar panels. 

“Given the company's shareholder structure and general prevailing sentiment of the UK public markets, the Good Energy board believes it may not have sufficient access to capital to capture many of the opportunities that lie in front of it,” the company said. Its 26-per-cent shareholder, Ecotricity, has backed the buyout, and the total irrevocable undertakings cover 30 per cent of the share count. AH  

Diversified Energy inks $1.3bn deal 

US onshore oil and gas company Diversified Energy (DEC) has landed its biggest deal yet, a $1.275bn (£1bn) takeover of Maverick Natural Resources, adding around 60,000 barrels of oil equivalent per day (boepd) in production. The actual purchase price is around $550mn, with the extra $700mn coming from Maverick debt to be transferred. The new assets include a mix of oil and gas wells across the country, including Diversified’s existing Appalachia exposure and adding wells in the Western Anadarko, Permian, Barnett and Ark-La-Tex (at the border of Arkansas, Louisiana and Texas) areas. Peel Hunt forecasts the deal will improve unit Ebitda margins by a quarter, while Maverick will add around $125mn of free cash flow, using the figure from the 12 months to 30 September. 

Diversified said it had already lined up a new $1.5bn loan that will include existing debt as well as the Maverick borrowings. The company said the deal would allow for a “natural deleveraging process”. Net debt stood at  $1.6bn as of 30 September. AH