Shares of embattled insurance outsourcerQuindell(LSE: QPP) are surging this morning on takeover rumours.
These rumours stem from a report published yesterday in The Sunday Times. The report claimed that Australias largest law firm, Slater & Gordon, is on the verge of making an offer forQuindells legal services division.
According to reports,Slater & Gordon an Australian law firm with interests around the worldis contemplating a640m cash offer for Quindells legal services division, which is equivalent toaround 145p per share.
Whats more, as part of the deal,Slater & Gordon is expected to pay Quindell 50% of receipts from noise-induced hearing loss cases being investigated by the division.
These terms value Quindells legal services division at around 900m. With the 640m upfront cash payment complemented by receipts from hearing loss cases ofbetween 100m and 300m over the next three years.
According to sources, Slater & Gordon has already completed its due diligence on Quindell. It is expected that the deal will be officially announced before 23 March, when the Australian groups exclusivity agreement runs out.
Could it be different this time?
Quindell is no stranger to takeover speculation. Ever since the group embarked on a turnaround plan, after the departure of formerchief executive Rob Terry in November of last year, there has been an almost continual stream of rumours surrounding the company.
And it remains to be seen if this latest rumour has any truth behind it. At present, there is little to suggest thatSlater & Gordon will make an offer for any part of Quindell. The two groups have been in discussions for some time and so far,Slater & Gordon has not expressed any concrete interest in all, or part of Quindell. Quindells management had to reassure the market at the end of February that negotiations between the two groups were still in progress, amid speculation that the talks were starting to unravel.
Nevertheless, as the saying goes theres no smoke without fire and this takeover rumour could have some truth behind it. Personally, Im always sceptical of any takeover speculation more often than not, the speculation is just that, speculation, and nine times out of ten, no deal will be announced.
Unfortunately, any offer for all or part of Quindell is likely to be below the companys all-time high of 626p reached at the beginning of 2014, just before the company came under the scrutiny of short sellers.
The bottom line
All in all, a bid for Quindell’s legal services division could be just around the corner but there’s no guarantee that any deal will emerge. So,investors shouldn’t expect fireworksfromQuindellany time soon.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.