RBC sees 'good chance' of a takeover deal at IWG
Following IWG's announcement that it had received a takeover approach from one private equity company and proposals from two others, analysts at RBC Capital Markets think there is a "good chance of a deal" for a number of reasons.
With equity markets continuing to remain sceptical in recent months and years, IWG chief executive and founder Mark Dixon has seemingly become increasingly frustrated that the firm's shares had not been valued properly, RBC suggested on Monday.
However, the analysts argued that IWG had not helped itself, given the timing of the warning last year and another cost-driven downgrade during the first quarter of 2018, leading the analysts to believe the business would be "better off in private hands" as it can grow its estate without worrying about short-term earnings per share.
Given the failed Brookfield/Onex approach in 2017, analysts suspect the newly made approaches would make an offer north of 300p per share, higher than the 280p offered last year, and hence "would have more chance of success".
RBC still rated IWG as a 'sector perform' stock, based on "the name" and its "unrivalled market position, significant expansion potential and strong structural growth drivers".
"However, with the company continuing to embark on an aggressive expansion plan, and credibility still low, we believe it will be sometime before the equity market will give the benefit of the doubt.".
RBC left its target price for IWG of 220p unchanged.