Monday, 28 July 2008

Detica and BAE Systems

BAE Systems has confirmed its bid for Detica. See BAE Systems identified as Detica bidder. It's at 440p which values Detica at £531m. That equates to a 57% premium to the closing price before the possibility of a bid was announced on 17th July. That's a 26 P/E to current year expectations.

I guess nobody can say 'done deal' before it is but it looks a very good price. The share price has risen to 437p today so the market isn't factoring in any higher competing bid. The directors have accepted the bid but have probably negotiated the usual break clauses should a significantly higher offer emerge.

Detica also announced their IMS. It showed Q1 revenue up 14% - all organic. Both UK and US Government business is clearly doing well with descriptions like "healthy", "good progress" and "very well" peppering the statement. Telecoms, Media and Technology also demonstrated "positive trends". But Detica's Financial Services business was "operating in a difficult global environment" and Q1 revenues were lower than in the previous quarter. The outlook statement was equally bullish in all but the financial services arena.

If I was Tom Black I'd have mixed feelings today. It's a good deal and, timing-wise, who knows what economic difficulties lie ahead. Black has delivered 39% compound revenue growth and 25% compound EPS growth over the last 5 years. That's pretty good! Black can hold his head high. On the other hand, it is must be a sad day after 30 years of building a very fine company. Tom, I really do know how you feel on both counts!

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