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Carclo – as previously cautioned; takeover proposal pulled = shares slump

By Steve Moore | Tuesday 7 August 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Writing on plastic components and LED-based lighting systems manufacturing company Carclo (CAR) last month, I cautioned as the shares responded to a takeover proposal by rising back above 100p. Presently, the shares are more than 20% lower on the day, heading towards 90p…

This is on the back of prospective acquirer Consort Medical (CSRT) updating including “the board of Consort has determined that the proposed transaction would not deliver the required benefits in a reasonable timeframe… Consort confirms that it does not intend to make an offer for Carclo”.

Shares in Carclo had reached more than 120p after it was later last month updated that “Consort submitted a revised proposal” and that, with discussions regarding that ongoing, the Carclo board had requested that the Takeover Panel extend its deadline – with that granted to 5pm on 13th August.

That would have seemed to suggest a deal more likely – but instead it’s the “No Intention to Bid” announcement today from Consort and shares in Carclo slumping from a 117.5p prior close.

Carclo has responded that it “remains highly confident in the group's prospects and standalone strategy”. However, in November it was emphasising “the board anticipates that the group will trade in line with its expectations for the full year, with all three divisions set to have a stronger second half performance” - and in January, due to contract award delays and a large customer having not increased its orders as had been anticipated, it was a “significantly lower than its previous expectations” profit warning!

Therefore, I’d want to see at least some consistent financial delivery before having confidence here – and thus the current share price fall-back is a reminder of the caution which is often sensible on such potential takeover situations but I still currently continue to avoid.

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