Why Is euNetworks Group Ltd Up 33% Today?

euNetworks Group Ltd (SGX: 5VT), a company which has likely flown under-the-radar of many investors in Singapore, has jumped by some 33% to S$1.16 this morning. The company’s shares are still at S$1.16 as of the time of writing (12:35pm, 18 November 2014).

euNetworks is an owner and operator of high capacity fibre networks in Europe. The company has data centres, colocation facilities, and fibre routes across 38 European cities in 9 countries. Although the company is not well-known to investors in Singapore, it is one of the key investments of G.K. Goh Holdings Limited (SGX: G41), one of Singapore’s prominent investment-holding companies. G. K. Goh Holdings currently holds a stake of around 9.5% in euNetworks.

Yesterday morning, euNetworks had requested for a trading halt before the market opened (the half was lifted this morning) and subsequently announced that it has received a takeover offer.

In the announcement, it was revealed that EUN Holdings LLP has offered to acquire all the issued ordinary shares of euNetworks. EUN Holdings is a partnership formed by private equity firm Columbia Capital in the USA and other private equity investors.

Currently, Columbia Capital owns a total of 39.27% of euNetworks’ overall share count. EUN Holdings had also purchased an additional 17.32% stake in euNetworks; this thus boosts the partnership’s current stake in euNetworks to 56.59%.

EUN Holdings has offered to buy over the remaining shares of euNetworks that it does not yet control at S$1.16 each. The takeover price represents a 32.6% premium to the last transacted price of euNetwork’s shares on 14 Nov 2014. The takeover announcement also added that shareholders who collectively own 25.79% of euNetworks have pledged to not sell their shares to EUN Holdings as well.

Foolish Take

Although euNetworks owns very valuable assets in Europe, it has not been able to achieve consistent profitability for the most part of its history as a listed entity. Furthermore, the company has not distributed any dividends at all since its listing in 2004, according to S&P Capital IQ. Thus, it seems that the only way for shareholders to realize the value of the company is through a sale of the company itself – and that’s what is happening currently. At S$1.16 per share, euNetworks is being valued at 1.6 times its book value and 3.15 times its revenue.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own shares in the companies mention above