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Real-Time news about Taylor Woodrow (London Stock Exchange): 0 recent articles
|shakeb: Markpun why are you not posting on the TW. board. I do not know anything
about Wimpey but TWOD I am very familiar with.
Can you pls advise on the share price. I am wondering how they arrived at
the current range. What price would you consider cheap if I may ask.
I am not sure if to follow the Wimpey historical price.
|markpun: The newly merged builder is cut to hold from buy with a 415p a share price target, down from 490p, by Citigroup|
|judge jury: I think it's possible. Proforma PBT based on 2006 numbers for Taylor Wimpey are £777m. If you assume a 10% increase (see below) and add in £70m of synergies (at the low end of expectations), you get to forecast proforma PBT of about £925m. Take off some tax and divide by 1.141bn shares and you get proforma eps of about 57p. Put a PE rating of 9.5x on this and you get to about 540p.
However, the above assumes (1) earnings go up and (2) TayWimp attracts a PER of 9.5x. Both assumptions could be hit by interest rates. Moreover, TayWimp have to prove that the merger is working to get a higher rating that is more in line with the sector.
Interest rate worries are hitting the sector PERs at the moment and to hit 540p, these worries need to prove unfounded - i.e. the housing market in the UK and hence earnings don't collapse. It would also help if the US housing market starting to pick up a bit (which doesn't look too likely at the mo).
I think the Taylor Wimpey combination will prove to be a good one operationally and it will be good to have three housebuilders in the FTSE 100. However, the share price performance from here on in will depend in large part on where interest rates go and what happens to sector sentiment.|
|judge jury: Of course you never know, but the improvement in the WMPY share price and the narrowing of the discount would suggest the the market is now betting that the merger will go ahead. Personally, I think the merger will produce more shareholder value in the long term (although a 575p bid would have been attractive for many in the short term).|
|deanforester: The share price on merger will be the TWOD price. Currently values WMPY at 698p.|
|8gamsby: MARKPUN sorry meant no other offers or interested parties.Ithink if no-one else comes forward TWOD SHARE PRICE WILL PLUNGE.WMPY valued at over £2.7 billion.I hope someone else comes forward.|
|judge jury: Well, Robinson says they see nothing at this stage, but the WMPY share price is saying a PSN approach is all but a certainty. The WMPY share price at 598p is some 75p or 12% below the implied merger price of 673p so there are some big, presumably informed bets saying PSN is circling.|
|judge jury: I have realised that I have made a mistake with my ex-div/cum-div share price calculations. It looks like WMPY went ex-div on 2 March, whereas TWOD goes ex-div on 25 May. This means that the implied merger price of WMPY is 13.1p lower than I thought.
I think this means that TWOD's closing price of 489.5p yesterday would imply a WMPY price of 656.5p which is 21p (or 3%) higher than WMPY's closing price of 635.5p. So only minor bid speculation at the moment.|
|judge jury: Here's a simplistic post merger valuation. I have literally done it on a piece of paper in 5 mins so if there are errors, I apologise.
Assuming the merger goes ahead on the current terms, there will be 1,141m shares in issue, with TWOD shareholders keeping hold of the 582m shares they currently have and WMPY shareholders swapping their shares for 559m new TWOD shares.
I am not sure what the current forecasts are for the two groups, but the combined PBT for 2006 was £777m (source: 2.5 announcement). Let's assume they both grow their PBT by 10% this year and lets assume the £70m of synergies are achieved this year. This would mean the proforma PBT for 2007 is about £925m.
Assume a 30% tax rate, and we get to PAT of some £650m. Apply a sensible PE rating (lets say 9.5x earnings), and we get to a market value of £5.9bn. Given that there will be 1,141m shares in issue, this would imply a post merger share price of around 540p.
Persimmon would have to pay about 700p to disrupt the deal in my view ... tough call, but they are tough Yorkshiremen after all|
|judge jury: Gamsby8 - I dont think anyone can answer your questions with any certainty. However, speaking very generally, when all share mergers are announced you often see the offeror's share price fall initially (in this case TWOD) as the offeree's share price rises (in this case WMPY). This is because hedge funds (NB arbitrage firms) like to short the offeror and go long on the offeree. I think they make money on the inefficiency of the market, with very little risk. You need big bucks though to do this.
Often this effect is short-lived and the institutions instead will focus on the merits of the deal (rationale, post-merger strategy, synergies, who the management will be).
I remember when Morrisons announced its initial all share merger with Safeway. Morrisons share price fell and then continued to fall as people worried that they were biting off more than they could chew (ie massive integration risks).
That said, I believe the City will love this deal. The logic is compelling (strengthen slightly weak UK businesses, create strong platform in the US); synergies are high and achievable (I reckon £65-85m). There will probably be a cash component to the deal of the order £500-1,000m (special dividend to both sets of shareholders and/or promises of share buybacks post completion). There is also the added bonus that this will propel the new business into the FTSE 100.
The share price action backs this view up. I therefore think TWOD's price will eventually rise, even if there is short term volatility.|
Taylor Woodrow share price data is direct from the London Stock Exchange