Investment: Wobbly wheels at Mayflower
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.SO MAYFLOWER has won the battle of the bus makers. But is it a hollow victory? Mayflower's pounds 269m cash bid values Dennis, the bus to fire engine group, at a generous 18 times forecast earnings.
Funding the deal from borrowings allowed Mayflower to trump Henlys' rival cash and paper offer when the markets wobbled. But it also leaves Mayflower looking dangerously leveraged - interest cover next year will be just three times - as the economy slows.
The suspicion is that, having failed in two bids in recent years - including last year's tilt at Vickers - Mayflower could not afford to walk away. John Simpson, the group's chief executive, has a reputation for squeezing extra productivity while stimulating growth at companies he takes over. However, in Dennis he is taking on his greatest challenge.
True, Mayflower has correctly identified bus making as a consolidating industry and Dennis as a unique asset. The question is: what does Mayflower bring to the table? Its US distribution business Metrotrans - acquired during the battle - is distinctly second-rate, and its strategic partnership with Daimler-Benz is still stronger on hype than detail.
Mayflower shares - unchanged at 132p yesterday - reflect these worries: they have lagged the sector by a fifth since Mayflower launched its bid and now trade on less than 10 times forecast 1999 earnings, including Dennis. However, it will take Mayflower at least a year - and a few nifty disposals - to show that the wheels are not coming off. Avoid.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments