The largest shareholders of UK-based engineering firm Renishaw have abandoned an attempt to sell their shares after failing to find a suitable buyer.
Since putting their combined 53% stake up for sale in March 2021, the company’s Chairmen Sir David McMurtry and John Deer have been unable to find a bidder that meets their stringent criteria. According to Berenberg analysis, the pair received “several proposals” but they demanded that the firm not be relocated and set strict R&D goals, which “were always going to be obstacles for a potential buyer.”
Following Renishaw’s announcement that it would remain under its current owners, its shares have stayed flat, with investors seemingly satisfied with the status quo.
“At the start of this process we made it very clear that, with the board, we were focused on ensuring that we find the right new owner for our business,” said McMurtry and Deer. “Whilst the formal sale process didn’t result in a new owner for Renishaw, we are satisfied that it ensured a thorough and rigorous process that enabled us to evaluate a wide range of potential buyers.”
“We remain fully committed to Renishaw and have indicated to the board that we have no intention of selling our shares on the market for the foreseeable future.”
Sticking with the status quo
Having reviewed various acquisition proposals with its advisers over the last four months, Renishaw’s board has ultimately concluded that none of these bids “met the interests of all stakeholders.” As a result, the firm has wrapped up the formal sales process, and its majority owners McMurtry and Deer have committed to remaining at the helm, for now at least.
From the outset, the company’s board set out demanding terms for any potential buyer, saying that it was seeking a bidder which “respects its unique heritage” and allows it “to continue to prosper in the long-term.” Interestingly, on Renishaw’s failure to fund a buyer, a Berenberg analyst said that “valuation and management demands,” as well as the firm’s public listing scuppered any potential deals.
In the four months since the sale process began, McMurtry and Deer’s shares have dipped in value from being worth around £2.5 billion to £1.8 billion, potentially removing one of these stumbling blocks. However, the majority shareholders now maintain that they’re no longer looking to sell, kicking any potential deal into the long grass for the foreseeable future.
“We continue to enjoy good health and as we consider the future of our shareholdings in due course, we intend to follow an orderly process that continues to take into account the interests of all stakeholders,” added McMurtry and Deer. “Renishaw is a very special business with a highly successful business model and a very exciting future.”
An attractive investment?
Despite the continued macroeconomic uncertainty caused by COVID-19, and the additional red tape introduced by Brexit, Renishaw has largely managed to remain profitable during the last year. Over FY 2020, for instance, the company reported an 11% revenue decline yet it still returned a profit of £48.6 million, while many of its competitors went into the red.
More recently, Renishaw revealed in its H1 2021 financials that its turnover had largely recovered, dropping annually by just 2%, and it continued to stay in the black as well, generating a profit of £43.4 million. To a certain extent, the firm been able to achieve such solid results by insulating its business from Brexit, and it has expanded on its EU-based presence over the last six months.
This pattern also appears to be borne out in Renishaw’s upcoming FY 2021 financials, which the company now anticipates will see it generate £562 million to £567 million in revenue. If realized, this figure would represent a 10-11% rise on the £510 million reported for FY 2020, and see the firm fall just short of the £574 million it managed to turned over during a pre-pandemic FY 2019.
Renishaw’s rosy outlook has also been backed by Berenberg’s analysis, which highlights the firm’s strong Q4 trading, and an increase in its profit compared to guidance issued back in Q3. Moving forwards, the investment bank says that the company’s “record order book continues to benefit from the macro recovery,” and issues around the supply of consumer electronics have put it in a strong position.
Exploring Renishaw’s heritage
Since McMurtry and Deer first founded Renishaw in 1973, the company has grown into one of the world’s leading engineering firms, with an established 3D printing portfolio that has found wide-ranging applications. Earlier this year, power systems producer Domin deployed one of the firm’s additive manufacturing systems to create a novel line of eco-friendly servo valves.
Renishaw’s technologies have also found substantial medical applications, and the company worked with Herantis Pharma at around the same time, to 3D print drug delivery devices for treating Parkinson’s disease. During early trials, the firm’s neuroinfuse delivery system has proved capable of repeatedly delivering infusions to the functional tissues of organs.
Elsewhere, on the aerospace front, Renishaw has recently received £26.4 million in UK government funding to help develop a new metal 3D printer that’s capable of mass-producing small aircraft components. In essence, the system is being built to allow aviation production lines to operate more quickly and cost-efficiently than is currently possible.
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Featured image shows Renishaw’s majority shareholders John Deer and Sir David McMurty. Photo via Renishaw.