Thursday, June 09, 2005
Let Cox steer Chaucer valuation
At the end of April, the board of Cox Insurance received a takeover bid from a team put together by a former director, valuing the company at 94p (per share). Cox deemed this a fair price and recommended shareholders accept the offer.
This morning, Lloyd's insurer Amlin admitted they were the corporate stalker chasing Chaucer.
So what price would Chaucer directors accept? The companies operate in the same industry - it's only right they should be valued similarly.
At 94p, Cox shareholders were offered 1.8 times their company's asset value and 8.6 times diluted full year earnings per share. Using the assets metric that would value Chaucer at 69.6p, by earnings, 96.32. To most insurance analysts, assets is the key figure. At today's closing price of 69.5p, Chaucer is a sell if you believe most analysts (assuming the Cox measures can be applied).
Chaucer has risen substantially since the market picked up the smoke signals that someone was preparing a bid. If talks were called off Chaucer could go into freefall. What am I to do? I desperately need to fix a price at which I'd sell, otherwise how will I know what to do if a bid does materialise? But my two theoretical fair prices, 69.6p and 96.32p are further apart than Prince Philip and the Nation of Islam.
Two full trading days since the possibility of a takeover was raised I still don't know what to do.
Help.
The Artful Dodger
This morning, Lloyd's insurer Amlin admitted they were the corporate stalker chasing Chaucer.
So what price would Chaucer directors accept? The companies operate in the same industry - it's only right they should be valued similarly.
At 94p, Cox shareholders were offered 1.8 times their company's asset value and 8.6 times diluted full year earnings per share. Using the assets metric that would value Chaucer at 69.6p, by earnings, 96.32. To most insurance analysts, assets is the key figure. At today's closing price of 69.5p, Chaucer is a sell if you believe most analysts (assuming the Cox measures can be applied).
Chaucer has risen substantially since the market picked up the smoke signals that someone was preparing a bid. If talks were called off Chaucer could go into freefall. What am I to do? I desperately need to fix a price at which I'd sell, otherwise how will I know what to do if a bid does materialise? But my two theoretical fair prices, 69.6p and 96.32p are further apart than Prince Philip and the Nation of Islam.
Two full trading days since the possibility of a takeover was raised I still don't know what to do.
Help.
The Artful Dodger
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