In something of a rarity these days, one of the shares in the Woodford Equity Income fund delivered good news last week and the shares went up!
At least BCA Marketplace (LSE: BCA) used to be in the fund. But Woodford is only publicly listing the top 10 holdings, as I write, while the fund is in lockdown. For all I know, BCA could have been tossed out in the restructuring.
Takeover bid
However on 20 June, the firm announced a potential takeover offer from TDR Capital LLP and the share price shot up around 23% on the news. Today, BCA confirmed it has reached agreement with TDR via its specially formed takeover company Bidco at an offer price of 243p in cash per share. The offer is “unanimously recommended” to shareholders by the BCA directors.
Well done to those holding the shares. The offer represents a premium of 29.5% to BCA’s “volume-weighted average price” for the month to 19 June, which was the day before the offer was first announced. Such a rise will be helpful to the Woodford portfolio if the fund still owns its BCA shares, and a glance at the share-price chart suggests there’s every chance that BCA was a winning investment overall for Woodford – hooray!
The firm operates as a used vehicle marketplace and owns the well-known brand WeBuyAnyCar. It’s a decent-looking business and the financial record is impressive. Over the past five years, revenue shot up around 540% with profits and cash flow moving up fast over the period from a position of losses early on. The firm underlined its gathering financial strength with the fast-rising dividend payments it made. Prior to the offer announcement, BCA was yielding around 5%.
What I’d do next
And there’s more good news in today’s full-year results report, which reveals revenue rose 24% compared to the year before and adjusted earnings per share moved just over 13% higher. The directors continued the rapid escalation of the dividend by pushing up the total payment for the year by almost 13%.
I always have mixed feelings when a decent, fast-growing company is taken out with an offer. On the one hand, shareholders get an instant realisation of value and a boost to their portfolios. But on the other hand, the company taking over the business walk away with all the ongoing longer-term growth potential of the enterprise.
But if I held BCA shares today, I’d be looking to sell now because there’s still a chance something might happen to thwart the deal going through, and the shares could fall back again.
So how do we find the next BCA? I think this offer shows other investors often see the attractions in companies that we see ourselves. In the case of BCA, we had a fast-growing company selling at a reasonable price and paying a generous dividend. I’d look for more like that.
I also think the outcome with BCA is a good endorsement for Neil Woodford’s value-seeking investment style, despite his recent challenges.