Shares in British Polythene (LSE: BPI) have soared by 33% today after it announced that it had received a takeover approach from RPC. The deal is made up of 460p in cash as well as around 0.6 new shares in RPC, which values British Polythene at around 940p per share. This is a premium of around 30% to British Polythene’s closing price of 725p on 8 June and is the highest level at which the company’s shares have traded in the last decade.
As a result of this, on the face of it the offer appears to be a rather enticing one for investors in British Polythene. However, with the company’s shares trading on a price-to-earnings (P/E) ratio of just 11.7, it appears to be a less generous offer than at first glance. Certainly, the combined company could deliver improved profitability in the long run, but with British Polythene forecast to record growth in the next two years and having such a low rating, it may have offered superior long term capital gain prospects on its own.
Also rising today are shares in Wincanton (LSE: WIN). The supply chain solutions company’s shares are up by around 7% after it reported an encouraging set of full-year results to 31 March. Revenue increased by 4.4%, with a strong performance being delivered on new business wins and additional volumes in retail general merchandise. This helped the company’s underlying pretax profit to rise by 12.4% versus the prior year, with lower finance and tax charges aiding the company’s financial performance.
Looking ahead, Wincanton is expected to record a rise in its bottom line of 17% next year. This has the potential to cause a step-change in investor sentiment over the medium term, with Wincanton’s price-to-earnings growth (PEG) ratio of 0.4 indicating that the company offers a wide margin of safety. And with dividends being reintroduced, it appears as though Wincanton’s management team is upbeat about its future prospects which bodes well for the company’s investors.
Meanwhile, Home Retail (LSE: HOME) also reported today. The Argos owner recorded a rise in like-for-like (LFL) sales of 0.1% in the first quarter of the year, with total sales increasing by 2.6% versus the same period of the previous year. However, with gross margins falling by 100 basis points as a result of adverse currency and shipping costs as well as an adverse sales mix, the operating environment for retailers such as Argos remains challenging.
Looking ahead, Home Retail is on-track to be acquired by Sainsbury’s in the third quarter of the year. This seems to be a sound move for both companies since it should generate significant synergies as well as substantial cross-selling opportunities. As such, buying a slice of the combined entity appears to be a sound long term move.