Intertek Rejects EQT's Buyout Proposal Amid Growth Strategy

On April 16, 2023, Intertek Group plc (ITRK.L) announced its rejection of a buyout proposal from Swedish private equity firm EQT AB (EQTAB.ST), which valued the company at approximately £7.93 billion ($10.74 billion). EQT's offer of £51.5 per share represented a 36.6% premium over Intertek's closing price on April 9, the day prior to the bid. Following the announcement, shares of Intertek surged by as much as 14%, reaching £49.58.

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EQT's interest in acquiring Intertek emerged just before the company's announcement of its growth strategy, which includes plans to explore a separation of its two business segments. This strategic move aims to enhance growth and maximize shareholder returns. Analysts, including Joe Brent from Panmure Liberum, suggested that the buyout proposal may have accelerated Intertek's de-merger announcement, potentially attracting other bidders from both trade and private equity sectors.

Reuters

The interest from EQT has not only impacted Intertek's stock but also influenced the shares of its competitors, such as Bureau Veritas (BVI.PA), which rose by 3.6% following the news. The testing and certification industry has seen increased attention in recent years, driven by heightened concerns regarding quality and sustainability. The current economic climate, characterized by relatively lower valuations of British firms, has made them appealing targets for private equity acquisitions, as evidenced by other recent deals, including a $1.9 billion takeover of aero parts supplier Senior (SNR.L) by U.S.-based Tinicum.

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Intertek has emphasized that EQT's proposal undervalued the company, aligning with its strategic vision for growth. The firm reported a 5.4% increase in like-for-like revenue in the first quarter of 2023 and reaffirmed its forecasts for mid-single-digit growth for the year. The company’s leadership appears committed to pursuing its own growth strategies rather than entertaining the buyout.

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While Intertek's management has rejected the buyout, some analysts speculate that the proposal could indicate a shift in the market dynamics for testing and certification firms. Critics argue that rejecting the offer may overlook the potential benefits of a strategic partnership with a private equity firm, especially in a competitive landscape.

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Following the rejection of EQT's bid, Intertek is expected to proceed with its plans for a de-merger, which could open the door for new bidders and alternative routes for value creation. The market will be closely watching for any further developments regarding potential interest from other investors or firms.

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“The potential bid may have ?increased the urgency of the de-merger announcement, which provides an alternative route to value creation.” — Joe Brent, Analyst at Panmure Liberum

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“Testing and certification firms have gained traction in recent years helped by a rise in interest around topics such as quality and sustainability.” — Industry Expert

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