Babcock International Group (Babcock), the international aerospace, defence and security company, is pleased to announce that it has entered into a definitive agreement with KBR for the sale of its wholly owned subsidiary Frazer-Nash Consultancy Limited (Frazer-Nash Consultancy) for a cash consideration of £293 million (implying an enterprise value of £285m on a cash free/debt free basis), subject to routine closing adjustments and before transaction costs.
Headquartered in the UK, Frazer-Nash Consultancy delivers innovative engineering and technology solutions across a broad range of critical national infrastructure, helping to provide assurance to operators and regulators from a network of nine UK and four Australian locations. The consultancy, which has grown strongly since Babcock acquired it in 2007, employs around 900 people.
The sale forms part of Babcock's targeted disposal programme, which aims to generate at least £400 million of proceeds in the next twelve months. Frazer-Nash Consultancy is an outstanding business which provides independent advice to its customers and on that basis has operated largely independently from Babcock. Proceeds from this transaction will be used to reduce net debt.
Babcock CEO David Lockwood said:
"We are making real progress on our plan to streamline and focus the group on our key markets. Divesting at least £400 million of businesses in our targeted disposals programme will enable us to reduce complexity and increase our focus as we return Babcock to strength. Frazer-Nash Consultancy is a good fit for KBR, and I wish them every success in growing the business further."
The consultancy is part of Babcock's Marine sector. For the year ended 31 March 2021 it reported total revenues of £100.5 million (year ended 31 March 2020: £101.9 million), profit before interest and tax of £13.5 million (year ended 31 March 2020 £17.1 million). As of 31 March 2021 gross assets were £79.9 million.
Completion of the agreement is subject to approval by the Australian foreign investment authority.
The agreement constitutes a class 2 transaction for the purposes of the UK Financial Conduct Authority's Listing Rules, and as such does not require Babcock shareholders' approva
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Re: Cobas AM: Nueva Gestora de Francisco García Paramés
Tweedy Browne, que son una gestora americana muy value y mítica de la que gusta a los gestores españoles -creo que Guzmán de Lázaro la ha nombrado alguna vez como uno de sus referentes- ha comprado BABA, según su último informe.
El tema es si el Gobierno chino va a impedir a estas grandes empresas chinas seguir creciendo, al querer impedir que le "hagan sombra" y empezar a hablar de una redistribución de la riqueza, una vez que la economía no siga creciendo tanto.
"Alibaba’s core marketplace business is a strong cash generator. We believe it should continue to grow with the e-commerce sector, driven by growing consumption in China and penetration into newer categories.
Alibaba also has continued to invest significantly in newer initiatives, such as Taobao Deals and Taobao Grocery, to extend the growth runway of the company.
In April 2021, the SAMR announced a $2.75bn fine on Alibaba for its violations of the Anti-Monopoly Law, putting an end to the bulk of the regulatory review and overhang. The fine equated to 4% of revenue and a minor portion of Alibaba’s net cash ($51bn as of December 31, 2020). Management does not expect any material impact on its business from the change in exclusivity arrangement imposed by regulators. Ant Financial could face greater regulatory impacts, but it is a relatively small part of our total valuation of Alibaba, so the downside is limited in our view. At time of purchase, Alibaba sold for less than 12x its estimated core “marketplace” EBITA, after deducting values for its other assets (i.e., international commerce, cloud, and new media) from Enterprise Value.
We valued the company’s cloud business using an operating margin similar to Amazon Web Services (AWS) and a 15x operating multiple. While the cloud business just turned marginally profitable last quarter, Alibaba is a significant leader in the industry (≈40% market share) and has first-mover advantages. As can be seen from AWS, cloud is an industry with strong economies of scale and high switching costs. China’s cloud industry is less mature than in the U.S., and Alibaba has been investing significantly to grow scale (AliCloud grew revenue over 50% in 2020), and in the longer-term we are optimistic that its operating margin can reach AWS levels. Alibaba’s management recently provided financial guidance indicating that all of the company’s incremental operating profit this year (fiscal 2022) would be reinvested into new initiatives. As a result, the company’s operating profit will be relatively flat this year. We do not believe this changes the long-term earnings growth rate or value of the business.
