In major news on UK stocks, Diploma PLC (GB:DPLM) shares rallied by almost 10% after the company announced the acquisition of Peerless Aerospace Fastener LLC, a U.S.-based specialist distributor of aerospace fasteners. The deal is valued at £236 million and is expected to close over the next few weeks, dependent upon regulatory approvals. Diploma shares soared to a record high, topping the FTSE 100 index on Wednesday.
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Diploma PLC supplies specialized products and services across the UK, Europe, and North America.
Rationale Behind the Deal
Diploma expressed confidence in the acquisition, which aligns with its goal of developing enterprises to foster sustainable organic growth. The acquisition will further enhance the company’s presence in the aerospace fastener market, with improved product offerings and market presence in both the U.S. and Europe.
Post-acquisition, Peerless is projected to boost group EPS (earnings per share) by approximately 8% in the first year. The deal value also represents a ROATCE (return on average tangible common equity) of 15%, surpassing the group’s cost of capital.
According to the agreement, Diploma will initially pay approximately £228 million in cash, with the remaining 3.5% payment contingent upon Peerless’ performance in FY27.
Is Diploma Stock a Buy?
After the announcement of the deal, Morgan Stanley analyst Annelies Vermeulen assigned a Buy rating to the stock, predicting a 3% upside.
On TipRanks, DPLM stock has received a Moderate Buy consensus rating based on two Buy recommendations. The Diploma share price target is 3,857.50p, which implies an upside of 2.4% on the current price level.
