Amec Plc, a U.K. oil engineering company, made an approach to buy Kentz Corp. for as much as 680 million pounds ($1.1 billion) to expand its energy construction and services business.
The offer at 565 pence to 580 pence a share was rejected by Kentz, Amec said today in a statement. Kentz surged 24 percent to a record 591 pence by the close in London, valuing it at 696 million pounds. Amec was little changed at 1,085 pence.
Kentz, based in Tipperary, Ireland, received interest from several potential buyers, three people familiar with the matter said. Buying Kentz would give Amec, with a market value of 3.2 billion pounds, expertise in the liquefied natural gas business, said Dougie Youngson, an analyst at VSA Capital Ltd. in London.
“It makes a huge amount of sense for Amec to do such a deal,” Youngson said. “Amec wants to get more involved in the LNG business and buying Kentz would help it achieve that.”
Kentz said Amec’s offer undervalues the company and it isn’t considering others after rejecting a lower bid from M+W Group GmbH. Kentz hired UBS AG and Investec Plc as advisers.
A bid at 700 pence would probably be taken seriously, said Youngson, who has a buy recommendation on Kentz’s stock.
Amec said buying Kentz would boost its presence in growth areas, expand its range of services and bolster its position in mining, oil and gas. Chief Executive Officer Samir Brikho said Aug. 8 that he sees growth in the North Sea, Gulf of Mexico, and Middle East. He’s targeting earnings per share of 100 pence by next year, compared with the 82 pence last year.
The company must say whether it will make a firm offer for Kentz by 5 p.m. on Sept. 16, according to U.K. trading rules.
Kentz this month won long-term contracts in southern Africa and is involved with LNG projects in Australia.