Reliance Worldwide (ASX: RWC) rallies +5% on takeover news
Reliance Worldwide Corporation (ASX: RWC) is trading ~5% higher today after agreeing to a binding ~$A$4.1 billion takeover by Brookfield Capital Partners at AU$4.75 per share cash — the fourth and final sweetened offer in a process that began in August.
- We believe this acquisition will proceed and moving forward the stock will grind up towards $4.75.
RWC entered a Scheme Implementation Deed with Brookfield today, formalising terms after three earlier bids at A$4.15, A$4.25 and A$$4.50 were each rejected or improved upon. The board has unanimously recommended shareholders vote in favour. A “Go Shop” provision lets RWC solicit rival proposals until 15 October, keeping a small chance of a higher competing bid alive.
RWC last traded at A$4.53, a modest ~5% discount to the A$$4.75 offer — typical scheme-completion risk pricing rather than doubt over the deal itself. The stock is up 24% over one month and 39% over six months, almost entirely on the back of this process: the initial unsolicited approach on 18 August sent shares up 24% in a single session, and today’s move reflects that speculation crystallising into a binding agreement.
Today’s rally is clearly all about the bid with the ASX 200 is up just ~0.3%. Importantly, the re-rating has been multiple expansion, not earnings growth: forward EPS is up only ~19% over the year, while RWC’s forward P/E has expanded from ~8.8x in April to ~16.4x today, almost entirely reflecting the takeover premium now priced in.
Key dates ahead: the scheme shareholder vote and the 15 October Go Shop deadline — any competing proposal before then would be the next catalyst.
MM’s Take: With the stock already trading close to deal value and the board unanimously backing Brookfield, the easy money here has been made. We’d treat RWC as a hold into the vote rather than a fresh buy, the risk/reward from here skews toward deal-completion timing rather than upside, unless a surprise rival bidder emerges during the Go Shop window.
