In less than four weeks, the UK may have left the EU – or not. That uncertainty is driving many businesses to distraction but it is also creating opportunities, particularly for companies looking to acquire British firms.
In the past three weeks, two Midas recommendations have been on the receiving end of takeover bids, tax software group Tax Systems and Dairy Crest, the group behind Cathedral City cheese, Country Life butter and Clover spread.
Midas recommended Tax Systems last July at 85.5p. On February 13, private equity firm Bowmark Capital made a £1.10 a share cash offer for the company.
Chief executive Gavin Lyons and investors with more than half the shares have already accepted the deal so it is almost certain to go through and shareholders will receive their money by April, making a return of almost 30 per cent in less than a year.
Dairy Crest is a more complex story. Midas first recommended the firm in 2013 when the shares were £4. By September 2017, they had risen to £6.16 and seemed to be on a roll.
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Tax Systems share price and data available here
But concerns about the food retailing market, economic worries and a big share placing last May took their toll and the stock was hovering around £5 until ten days ago, when Canadian cheesemaker Saputo made a £6.20 a share cash offer for Dairy Crest, valuing the company at almost £1 billion.
Saputo is one of the top ten cheese producers in the world and boss Lino Saputo fancies a slice of the UK market.
Cathedral City is exceptionally well-known here – eaten in six out of every ten households – and chief executive Mark Allen is keen to sell more abroad. He and the board are recommending the offer and, if all goes according to plan, shareholders will receive their cash by early May.
MIDAS VERDICT: Tax Systems shareholders should take their cash and watch to see what Lyons does next.
This is the second time he has delivered a generous takeover deal for Midas investors and he may well crop up in the market again.
Dairy Crest is less cut and dried. The share price has failed to reflect the company’s real value in recent months so there is little doubt that, even though the Saputo deal makes strategic sense, the Canadians will be snapping up a bargain.
Some investors are even hoping a counter-bidder will emerge. Shareholders should sit tight until the picture is clearer. At the very least, they will receive an early summer windfall.