How high could the bidding war for Webjet go?

Webjet Group Ltd (ASX: WJL) is now fielding two separate takeover bids, with BGH Capital joining Helloword Travel Ltd (ASX: HLO) in indicating it’s keen on buying out the company.

However, analysts at RBC Capital Markets believe that yet another bidder could enter the fray, potentially driving the price paid for the company even higher.

HelloWorld lobbed a potential bid for Webjet earlier this week, stating it would look to acquire the company for $0.90 per share, subject to due diligence and other conditions, including a unanimous recommendation from the Webjet board in favour of the deal.

This has been followed on Friday morning by a once again non-binding offer from BGH priced at 91 cents per share, which is also seeking a unanimous recommendation from the Webjet board.

The BGH bid follows a previous proposal put to Webjet in May this year to buy the company for 80 cents per share.

BGH already controls major stake

Webjet said in a statement to the ASX on Friday that BGH already had control over a significant proportion of the company’s issued capital.

As it told the ASX:

Pursuant to a co-operation agreement with Portfolio Services Pty Ltd, an entity associated with Ariadne Australia Ltd and Gary Weiss, BGH has a total relevant interest of 18.3% in Webjet ordinary shares.

Conditions associated with the BGH bid include that it attain control over at least 75% of Webjet shares and the required regulatory approvals.

Similar to the HelloWorld bid, the Webjet board will now allow BGH access to its books to conduct due diligence.

As the company said:

After carefully considering the revised BGH proposal, the Webjet board has agreed with BGH’s request to provide BGH with an opportunity to conduct due diligence, subject to the parties agreeing to a mutually acceptable non-disclosure agreement.

Webjet shares were trading at 91.5 cents on Friday morning, up 2.5 cents.

Analysts at RBC Capital Markets believe that the takeover tussle may intensify even further, as they said in a note issued to clients on Friday.

Two competing bidders, with the board granting both access to due diligence would indicate to us that Webjet is very much in play. We continue to believe Webjet possesses attributes (strong market position, brand awareness, cash generation and cash balance etc.) that would appeal to both trade and financial buyers alike. We do not consider it unreasonable that another bidder may enter the fray.

RBC has a price target of $1.10 on Webjet shares.

Solid first-half results

Webjet earlier this week reported its first-half results and declared an inaugural dividend of 2 cents per share.

The company announced on Wednesday that its first-half revenue totalled $67.9 million, representing a 1% decrease from the same period last year, while net profit increased to $6.2 million, a 41% rise.

Webjet said it was a “challenging trading environment for the group”, with bookings down 8% and total transaction volumes down 3%.

Domestic bookings were down by 10%, while international bookings were up 4% and made up 22% of total flight bookings.

The company will pay a 2-cent first-half dividend, equivalent to 100% of underlying net profit, “consistent with the announced intention of maximising the distribution of franking credits as they become available, including the payment of special dividends above the target ratio”.

Webjet said a proposed buyback program was on hold for now.

Webjet Managing Director Katrina Barry said the results were “broadly in line with expectations, demonstrating the resilience of our business, despite experiencing challenging market conditions”.

The post How high could the bidding war for Webjet go? appeared first on The Motley Fool Australia.

More reading

• Why Nufarm, Nuix, Silver Mines, and Webjet shares are roaring higher today
• This travel company has announced a takeover offer and an inaugural dividend on the same day
• Why DroneShield, Graincorp, Webjet, and Xero shares are sinking today
• Why are Webjet shares getting smashed today?

Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.