Volex rallying support for TT takeover

Proof it’s not just a 1970s TV series that could be titled Bouquet of Barbed Wire. It can fit M&A too — at least to judge by the efforts of the cable maker Volex to snare its smaller rival TT Electronics via a mooted £249 million bid.
On Friday, Volex’s executive chairman disclosed that, after two takeover approaches late last month, he’d had enough of being rebuffed by TT’s board. So, he was going over their heads to investors, with what was then a 139.6p-a-share indicative bid at a 76.7 per cent premium: 62.9p in cash and 0.223 in new Volex shares for each of TT’s.
In doing so, he also delivered a TT demolition job. It spanned its poor profits, margins and record on acquisitions, plus September’s profits warning and the problems since. He made it clear, too, who he thought to blame, citing “execution missteps by the board, including former and current executive leadership. As a result TT Electronics’ shares are trading at a ten-year low,” he said.
It was, in M&A speak, a classic bear hug. So who, you ask, had come up with it? Nat Rothschild, or Lord Rothschild as he’s now known, the Volex boss with a 25 per cent stake. And, yes, there is an obvious riposte: isn’t he the bloke who gave us the Bumi mining fiasco, not to mention Genel Energy? Indeed, he is. But investors have had a far happier experience at Volex. And not least because, in contrast to Bumi, neither he or they are being duped by Indonesia’s Bakrie family.
After that farrago, a man as rich as Rothschild could have kept clear of the public markets. Instead, in 2015, he became executive chairman of Aim-listed Volex, turning a £30 million tiddler into what, ahead of his TT tilt, was a group valued at £630 million: one employing 13,500 staff in 25 nations and nicely cabled up for a decarbonising/AI world.
Over that time, TT has been going in the opposite direction: a point Rothschild didn’t miss. Ditto three Volex executive directors, who once worked for TT. In a nine-year tenure, TT’s ex-boss, Richard Tyson — now chief of Oxford Instruments — earned £10 million-plus pay but left the shares below where he joined. His successor, Peter France, in charge since October last year, unveiled a plan in April to “unlock value”. Instead, after problems in the US, he halved the share price to 75p — at least before Volex arrived.
Still, has Rothschild dangled enough? TT’s board, chaired by Warren Tucker, said Volex’s tilt “fundamentally” undervalued the group. But it also said it had “recently received and rejected an all-cash indicative proposal from another party at a significantly higher value”. Yet, the question it won’t answer is what it means by “recently”. Was that before or after September’s profits warning? The shares had ticked higher for a few days in August. Was it then?
Richard Bernstein, of the activist Crystal Amber fund, is no longer a TT shareholder. But as he quipped: “More front than Selfridges springs to mind when reading TT . . . responding to bid proposals from Volex.” He also said that, in contrast to Rothschild’s “skin in the game”, France “hasn’t yet bought a share”, even if he had nil-cost options that, purely thanks to bid interest, were now “worth £1.4 million”.
Still, with the merger arbs aboard and Volex shares down more than 10 per cent to 302p, its TT bid now works out at 130.2p a share. Investec called it “highly opportunistic”, given likely synergies. Stifel reckons Volex, which has bought a 2.95 per cent stake in TT, will need to get to “160p-plus”. And, at 104p, down 6 per cent, TT shares are hardly signalling a deal. Rothschild must persuade three big TT investors — Fidelity, BlackRock and Aberforth — together with about 30 per cent. But, as Stifel noted, much of his “critique of TT’s record rings true”. He just has to add some sweeteners to his opening barbs.
Have you followed a newspaper’s betting tips lately, only to see the useless nag fall at the first? Or, maybe, an analyst’s “buy” note, when sounder advice would have been “Cannot Recommend A Purchase”? Fear not. Sooner or later the claims company RGL Management will have coralled equally sore losers to sue the tipster’s paper or analyst’s bank.
It’s up to something similarly ridiculous with its planned High Court claim, apparently on behalf of more than 5,000 people, against Hargreaves Lansdown. The reason? The platform’s cheerleading for Neil Woodford’s imploding equity fund right up to the day it was gated in 2019. True, it was a complete balls-up by Hargreaves and its then research chief Mark Dampier. Not only did it keep the fund in its “Wealth 50” top picks, it ramped up Woody, quoting him saying he was “focused on a valuation opportunity, the likes of which I haven’t seen for more than 30 years”.
One result? By the time his fund was shuttered, 291,520 Hargreaves clients were in it, some indirectly via six of its multimanager funds. Yet RGL, which is charging 25 per cent fees on any legal gains, will have to prove Hargreaves “was aware that the fund was failing” but promoted it anyway. In fact, in December 2017 it had alerted clients to the rising “proportion of small and unquoted stocks” and, by 2018, to its falling liquidity, even if it kept top 50 status.
Unlike Link Fund Solutions, which had an oversight role and did pay compo, Hargreaves simply tipped it. Caveat emptor must count for something. Hargreaves didn’t force its clients to invest in Woody’s washout. That was their own fault.
When Elon Musk unveiled his Robotaxi on October 11, the shares fell 9 per cent to $218. Look at them now: up to $338 on talk that his pal Donald Trump will relax the rules for self-driving cars. Has Tesla’s technology got $400 billion better in six weeks?