Bradken Limited jumps on renewed takeover talk: What you need to know

The engineering contractor is hotly sought after among private equity corporate raiders as the stock wallows around six-year lows. The takeover story for Bradken Limited (ASX: BKN) has only just begun.

Brendon Lau

Brendon’s passion for shares started by accident in 2003 and he has worked in various roles around capital markets ever since as a trader, stock analyst and markets reporter with the Australian Financial Review. Most of his wealth has come from share investing than any other asset class, and that has given him the financial freedom not to work full-time, if he chooses to. Brendon is a medium to long-term investor who aims to hold positions for a year or longer and is focused on fundamental analysis, although he will occasionally use technical indicators to time his entries and exits. Brendon has an MBA from Melbourne Business School and is RG 146 certified. He lives in Melbourne with his wife, three kids and two dogs.

Published June 5, 2015 12:23 pm AEST

Mining and civil engineering contractor Bradken Limited (ASX: BKN) jumped to a two-week high on reports that it had received another takeover bid in the past two months.

Shares in Bradken jumped 2.2% to $2.27 in early trade after The Australian reported that private equity firm Kohlberg Kravis Roberts (KKR) made an offer to buy the company after rival firm Pacific Equity Partners (PEP) teamed up with Koch Industries to make a $2.50 offer for Bradken earlier this year.

But the stock couldn't sustain its positive momentum as it gave up early gains to trade flat in late morning trade when the market worked out that the report didn't tell us anything we didn't already know.

There were also no details on how much KKR was willing to cough up, the attaching conditions and when exactly the written offer was delivered to Bradken.

This isn't the second time Bradken has been courted. PEP initially joined forces with Bain Capital to put a $5.10 offer for the group late last year before the private equity firms walked away after they said they couldn't raise funds at an acceptable price to consummate the deal.

It seems every time a bidder walks away, Bradken's share price plunges to another multi-year low.

Perhaps this is why management has become coy about reporting such approaches. The April bid by PEP and Koch was also exposed by the media and Bradken has refused to comment on today's KKR bid.

I have highlighted Bradken on a number of occasions as a company most likely to get a "second chance" offer following Programmed Maintenance Services Limited (ASX: PRG) second stab at merging with Skilled Group Ltd. (ASX: SKE), and the sale of copper and gold miner PanAust Limited (ASX: PNA) to its persistent Chinese suitor.

We have not heard the last of the takeover saga for Bradken as the stock is trading on valuations that are hard to ignore for investors willing to look through the mining and civil construction down-cycle.

These corporate raiders will be back.

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