Worley takeover buzz

UNEXPECTED share prices gains in energy services player WorleyParsons have led to speculation it has become a takeover target.
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In a recent client note Deutsche Bank said there had been enquiries by market investors over the matter.

The bank observed that Worley’s share price had climbed 6% and 9% on rising volume over the past two trading sessions.

While DB believed it was “unlikely” a global peer would try to acquire Worley, it did note that the engineering company was trading in line with its global peers in terms of figures for enterprise value and earnings before interest and tax.

“Low cost debt funding could enable an earnings and value accretive deal," DB said.

The bank assumed an acquisition attempt by a rival could include a 30% takeover premium plus aim to achieve $US200 million ($A256 million) of cost synergies.

In September Macquarie Wealth Management put an outperform rating on Worley based on its stronger margin North American growth plans (chemicals, pipelines, upstream oil and gas).

While Worley has since won work from Canada’s oil and gas scene it also won the front-end engineering and design contract for Arrow Energy’s 500km Bowen pipeline project in December.

In January, Goldman Sachs expected the bear market in oil was going to be a “major headwind” for Worley’s revenue outlook and slashed its 12 month target price for the stock from $12.90 to $8.60 at the time.