Investors brand US private equity swoop for UK’s Hyve ‘opportunistic’
Providence bid undervalues exhibition company, say leading shareholders
Top shareholders in exhibition company Hyve have branded the takeover approach by Providence Equity of the US “opportunistic” as it warned of the risks to UK companies of being acquired too cheaply.
Fund managers Redwheel and Blackmoor Investment Partners are among London listed Hyve’s long-term shareholders that say the bid does not fairly value the company and its future growth prospects.
It comes as energy services company Wood Group revealed it was the target of three bids from US private equity firm Apollo last week in another sign that UK small and mid-cap stocks are vulnerable to takeovers.
The Providence warning follows a cash offer of 105p per share for Hyve valuing the business at about £300mn after an earlier approach of 101p. Providence Equity has three weeks to lodge a formal offer.
Douglas Smith, managing partner at top 20 shareholder Blackmoor, said: “We think that the suggested price is not representative of [Hyve’s] value.”
He said the company “has real potential but is at a point in its life cycle where it has suffered” largely as a result of Covid-19 lockdowns and the war against Ukraine.
He added the share price, which took a hammering from the pandemic, “has little to do with the intrinsic value and prospects of the company”.
It was one of many companies that suffered because of lockdowns, which stopped it from organising exhibitions and conferences. Its shares are trading at 103p, more than 80 per cent down on highs in January 2020.
The war against Ukraine also accelerated a planned exit from Russia, which represented half its revenue in 2021.
Investors said Hyve’s management has successfully navigated and repositioned its business since the lockdown hit, paving the way for growth yet to be reflected in the share price.
Redwheel fund manager David Stewart, the third-largest shareholder in Hyve, was upbeat about medium term growth predicted by management of at least £250mn in revenues and an operating margin of 30 per cent.
“It looks pretty positive and should be an opportunity for [long-term] shareholders to recoup some of the losses [from Covid-19 and Russia],” he said.
“The UK, in particular in the small and mid-cap space, is trading on comparatively meagre multiples and so where the public markets aren’t willing to value these companies at higher multiples, strategic and financial buyers appear willing to do so. It does make quality small and mid caps vulnerable,” he added.
Another shareholder said the price offered by Providence “was far too low” and about the same level of 107p when the company raised funds in November 2021.
A fourth shareholder, in the top 10, said: “My sense is that the price is too low given the fairly obvious deep value in this business. Now that the Russian assets are disposed, this should . . . fit nicely and assertively within a larger industry player — like Informa, Ascential Events, Clarion, Tarsus.”
Hyve declined to comment. The company’s board said it was “considering its position” in response to the Providence proposal last week.