Legend has confirmed the takeover from Adamantem, but the deal is far less palatable than the AFR hinted.

For starters, the $100m offer was on an enterprise basis (i.e. including debt), which values the company at just 36.5c per share. 

Second, although the company said that the cash-buy out would include a special dividend component, it would only be a maximum of 7c. They have mountains of franking credits, and could have supported a much bigger special dividend in my view. Those franking credits have no value to the company.

So, accounting for franking credits, the buy-out is equal to approx 39.5cps. While that's a healthy premium to the recent market price, it still only represents a P/E of ~10 on forward earnings.

Perhaps the outlook wasn't as strong as expected. Or the Managing Director and major shareholder Brad Dowe (who owns ~30%) was just happy to take a massive payout and sit on a beach somewhere. He will personally get around $22m for this deal after all.

Disappointed.

Full announcement here

The AFR is reporting that private equity firm Adamantem Capital is looking to launch a bid for legend that values the company at around $100m (equal to about 46c per share).

Article is here for those that have a subscription.

Shares are presently in a trading halt pending a formal announcement from the company...

Glad to have it on my Strawman scorecard!

Legend Corp. is an 'Engineering Solutions Provider' -- that is, it provides components, consumables and tools to various industries, things like cables, connectors, circuit boards etc. 

It services a wide range of industries, including the electrical wholesale, infrastructure, plumbing and gas sectors. Legend has operations in Australia, New Zealand, the Pacific Region and exports to China and the USA.

Formed in 1962 and listed in 2004, Legend has reported consistent operating profit and managed to pay a dividend in almost every year. Over the past 10 years, it has delivered an average annual total return to shareholders of 21%.

A recent company presentation provides a good overview -- see here

Profit drivers include new products launches, big infrastructure investment in key regions and acquisitions.

In the most recent year, Legend achieved double digit gains on all key metrics and is forecasting another strong year. Indeed, just recently, Legend said that the first two months of FY19 had been extremely strong, with sales up 28% and higher margins helping to boost EBITDA by 70% (or 60% on a like for like basis). See update here

At the recent AGM, it said it expected HY EBITDA to growth by 32-37%. That's boosted by recent acquisitions, but organic growth also remains strong. 

These guys should also do well from the expected ramp up in Australian infrastructure projects over the coming years.

Shares seem attractive given pace of growth and outlook, and that it is led by the founder who still owns ~38% of the business.

See my forecats page for my valuation

First half profit came in higher than expected at $4.1m, a 46% improvement on the previous corresponding period.

This was on the back of a 32% jump in sales, which was bolstered by recent acquisitions. Orgainic sales growth was nonethless strong at 14%. In fact, all segments saw double digit revenue growth (excluding acquisitions).

The gross margin recovered from a dip in the preceeding period, and now sits at 44.5%

Operating cash flow was down from the pcp, largely due to an increase in inventory due to range extensions and ahead of key defense projects.

The interim dividend was increased by 21% to 0.85cps. The trailing 12 months dividend is 1.6cps, giving shares a fully franked yield of 4.4% (at current price).

No specific guidance was issued, other than the outlook was "positive" with "further improvement to profit expected in the second half" 

Happy with this, but easing back my valuation slightly

Announcement is here