The British engineering firm Bodycote is at the center of renewed interest from private equity investors following an increased offer from US-based Veritas Capital. The company’s board has recommended Veritas’s latest bid of £1.64 billion, translating to 932.8p per share in cash plus a declared dividend of 7.2p. Shortly after the announcement, London-based CVC Advisers indicated it was considering a counteroffer, signaling a potential bidding war that has been brewing over the summer.
Bodycote’s shares reacted positively to the developments, climbing 42p or 4.6% to close at 955p, surpassing Veritas’s current offer. The stock had experienced significant volatility since the pandemic, bottoming out at around 460p 15 months ago before regaining ground after initial interest from Veritas and CVC emerged in late spring. Share prices reached as high as 830p before retreating, with investor anticipation now driving them above the latest bid.
Originally founded over 100 years ago as a textile company in Leicestershire, Bodycote has transformed into a global leader in thermal processing and heat treatment technologies. The company specializes in treating metals and components to enhance durability for use in aerospace, defence, energy, automotive, medical, and general industrial sectors. Its operations are headquartered in Macclesfield, Cheshire, with approximately half of its business conducted in Western Europe and 40% in North America.
Recent financial results showed a 3% increase in revenues and a 10% rise in profits, although the previous full year reported operating profits of £104 million on revenues of £727 million, both down relative to prior years. Veritas values Bodycote at about 18 times this year’s projected post-tax earnings.
In its offer documentation, Veritas highlighted Bodycote’s unique technical capabilities, expertise in material science, and global customer network as key attractions. The firm also noted Bodycote’s ongoing rationalization process, including the closure of several sites, particularly within the automotive sector. Veritas expressed interest in Bodycote due to its alignment with Veritas’s portfolio, which includes companies involved in aero-engine technology, maintenance, and electronic component manufacturing for defence and space industries.
Veritas stated that owning Bodycote as a private company would offer enhanced operational flexibility and a long-term perspective to support ongoing investment, driving both organic and inorganic growth opportunities. Bodycote’s chairman, Daniel Dayan, said the board believed the offer reflected the company’s quality and management strength while providing shareholders with excellent cash value.
Meanwhile, CVC Advisers has urged shareholders to remain patient as it evaluates its options, indicating that the contest for Bodycote could still intensify. The outcome of this competitive process will be closely watched, as it involves a significant player in a technical industrial sector that has faced valuation challenges since the pandemic.