Tyman recommends Quanex bid

Building products supplier Tyman (LON: TYMN) has agreed a bid from Quanex Building Products Corp of 240p in cash and 0.05715 of a share for each Tyman share, which is equivalent to 160p/share. That values the former AIM company at £788m. The shares jumped 30.6% to 386.5p.

There is also an all-share alternative of 0.14288 of a Quanex share for each Tyman share. Quanex already owns 16% of Tyman. The management team of Tyman is being retained.

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Tyman shareholders will still receive the 9.5p/share final dividend for 2024. Tyman’s net debt was forecast to be £150m at the end of 2024, but likely cash generation is expected to reduce this to £130m by the end of 2025.

The product ranges are a good fit, and the group will be particularly strong in North America. Quanex will be able to use Tyman’s international presence to sell its products. There could be annual cost savings of $30m.

Tyman was expected to make a 2024 pre-tax profit of £78.4m. The bid equates to just over 13 times forecast 2024 earnings and that could fall to less than 12 in 2025. This does not make the bid appear particularly generous and Quanex says that it will be a significantly earnings enhancing deal in the first full financial year after the savings.

The Tyman share price reached 507p in June 2021. Underlying pre-tax profit peaked at £85.8m in 2022. The markets are tough, but there is continued recovery potential for Tyman.

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