CONSULTANT WS ATKINS is expected to offer 14% of its shares to Bovis parent P&O to avoid financing the 330M takeover of the management contractor with a rights issue, one City analyst said this week.
Analyst at stockbroker Henderson Crosthwaite Geoff Allum said he expected the current volatility of the London stockmarket to make a rights issue too risky.
Last week Atkins confirmed it was discussing buying Bovis from P&O (News last week). A joint statement issued at the time indicated that P&O would 'hold a material continuing interest' in the merged Atkins and Bovis business.
Allum said Atkins will instead borrow money to finance the deal, but that it will only be able to raise around 265M. As a result it is expected to issue new shares to P&O to make up the difference.
'WS Atkins could not fund such a price from its balance sheet without issuing paper,' he says in an investors circular. 'Given current market conditions and the substantial number of shares held by the (Atkins) family and directors, a rights issue may not be easily possible.'
Interim results published by WS Atkins on Monday showed pretax profits of 15M on turnover of 200.9M during the six months to the end of September. This compares with a pre-tax figure of 12.7M and turnover of 175.3M reported for the same period last year.
Chief executive Mike Jeffries said that operating margins had tightened during the first half, because Railtrack's rate of investment spend had been slower than expected.
(see Commentary page 14)