Amandasmsf,What you have is a business with no direction, a...

Amandasmsf,

What you have is a business with no direction, a position that has no growth and hence what you get is individuals that have no commitment for the long term and hence the high churn. I have seen it every day of the week.

You are correct with the offers, and I know that Legend also made an informal offer some time ago. Be clear, the electrical business is very much a strong business with lots of opportunity, strong cash flow and when well run can grow incredibly. This is a good business and can demand a high multiple especially to a consolidator.

With the interest rates at all time lows PE has taken a different approach and have been buying into business at multiples of between 6.5 to 8 X EBITDA. A deal can be done and LC may do it very close to her asking price, especially now with so much interest out there. I believe that a 7 X EBITDA multiple is closer to the mark especially when Legend was taken out at 7.3 X. The synergies alone would drive the multiple down making it a win win for both. Informal offers at 3 or 4 X EBITDA are a joke and if I was LC I would be insulted.

Please note based on 2019 Statutory accounts the electrical business delivered $8.107m in EBITDA and at a 7 X multiple that values the electrical business at $56.75m

I am sure that LC has challenged the team in the electrical business to deliver a higher EBITDA to increase the value of the electrical business and they have been doing so. Just remember they have already announced the consolidation of factory sites which as I recall will deliver a significant EBITDA uplift. If they spend $1m to consolidate sites and deliver say $500k in savings they are creating value for shareholders and closing the gap to LC's asking price. I believe it will get there.

The thing that baffles me is that they have put the consolidation on hold? What has driven this? Has someone come to the table with an offer closer to where LC wants?

The maths are simple.

Investment Portfolio $0.6871/ share as at November
Electrical business at a 7 X multiple $1.9572/share (based on 2019 Statutory accounts)

Total value of ECL $2.64/share well below current trading of $1.47/share

And remember if ECL has another buyback of 10% that $2.64/share moves up to $2.77/ share.

I believe LC will get there and I believe it will be in the next 18 months if not before.