A break-up valuation, written by stockbroker Teather & Greenwood, has been circulating in the City. This suggests the company is worth 40p a share, 31p of which is accounted for by its housebuilding operation. The paper puts a pricetag of £68m on this division.
A bid is expected because of the continuing consolidation in the housebuilding sector and the company's relatively low share price – 22p last Friday. Analysts also believe the contracting business could be sold off because, although it makes little money, it has a turnover of more than £400m and could attract a rival that sees its potential.
David Taylor, an analyst with Teather & Greenwood, refused to confirm what was in the valuation but said: "For three years Galliford Try has given an indication of how its construction arm should perform, and then done the opposite."
He said that without the contracting arm, the company was a small housebuilder. "In the real world, small housebuilders just get taken over," he said.
Kier is the obvious bidder. It has the money and growth
Mike Foster, KBC Peel Hunt
While housebuilding makes up most of the break-up valuation, the construction division is estimated to be worth 7-8p of the total share price. This is because because, despite a turnover of £487.3m, it made a profit before exceptional items and interest of £411,000.
Teather & Greenwood is known to have issued a "buy" recommendation for Galliford Try shares because it expects them to rise in value in the event that the company is taken over and broken up.
Some City sources say they expect a bid from a housebuilder during the summer, once the annual accounts are audited. Most believe the company will go for 30-35p a share. The bidder would then sell on the contracting arm.