The offer would be payable in a mixture of cash and Equinix shares, with approximately 54% to be paid in cash and 46% in stock.

For TeleCity shareholders, today’s offer means that the firm’s shares have now risen by 34% so far in 2015, and by 54% over the last year — although it’s worth remembering that Equinix is still carrying out due diligence on TeleCity and no deal is definite as yet.

Under UK takeover rules, Equinix now has until 5pm on 4 June 2015 to decide whether or not to make a firm offer.

Is TeleCity worth this much?

On the face of it, the Equinix offer puts a pretty toppy valuation on TeleCity, which also issued its first‑quarter trading update today.

Today’s update confirms that TeleCity’s directors expect the firm to meet full-year guidance, meaning that Equinix’s possible offer of 1,145p values the firm at 28 times 2015 forecast earnings.

That’s rich — but TeleCity’s earnings per share have grown by an average of 16% per year since 2009, and the firm enjoys a healthy 25% operating margin. These numbers suggest to me that the advantages TeleCity offers Equinix — in terms of greater scale and European coverage — probably mean that the price makes sense for Equinix.

What about the previous merger deal?

Today’s news may have caught some investors by surprise. Earlier this year, TeleCity agreed a merger deal with InterXion Holding NV that included a restriction on either firm discussing alternative proposals with other firms.

The good news — for shareholders, at least — is that the InterXion merger deal included a get-out clause, allowing TeleCity’s directors to consider another offer, if their legal duties to shareholders required them to do so.

Equinix’s possible offer is so generous that shareholders would rightly object were TeleCity’s board to reject it outright, so they don’t need to worry about the earlier merger deal causing problems.

Should you buy, sell or hold?

Many TeleCity shareholders probably sold their shares after the InterXion merger deal was agreed earlier in March.

It often makes sense to sell when a deal is in the price, in order to free up the money for new investments and avoid the risk of the deal falling through. Unfortunately, this approach does mean that you miss out if a bidding war develops.

I don’t think another competing bid is likely, so I wouldn’t buy any more TeleCity shares after today’s news.

Indeed, I reckon that now could be a good time to sell TeleCity and lock in some gains, as today’s offer is not yet a done deal, and TeleCity shares would be likely to fall back to their previous price of around 900p if the Equinix offer is not confirmed.

The post TeleCity Group Plc Soars After Possible New Offer: Should You Buy, Sell Or Hold? appeared first on The Twelfth Magpie.

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Roland Head 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.

Off the back of these upbeat results, management has decided to pay an interim dividend of 2p per share, double last year’s payout. 

Looking ahead, the company reported that customer traffic and sales to date in 2015 are encouraging. So, the group could be in line to report a strong year all round if the first half’s performance continues. 

What’s more, as today’s release smashed City expectations, Redrow now looks severely undervalued. For example, the City was expecting the company to report earnings per share of 35.4p for its 2015 financial year. However, today’s numbers show that the company is likely to report earnings of around 40p per share for its 2015 financial year. 

On that basis, even after today’s double-digit gain, the group is only trading at a forward P/E of 8.2. 

Redrow could be the perfect company for any investors seeking an undervalued play on the UK’s booming house market. 

All-share merger 

TeleCity (LSE: TCY) is the best performing stock in London at time of writing as the company has announced that reached a non-binding agreement on an all-share merger with Interxion Holding N.V..

TelecityGroup, is a provider of data centres in key European cities, while Interxion is a European provider of cloud and data centre colocation services, so a merger between the two companies makes sense. Demand for data centre services is evolving rapidly, and the scale, of the enlarged business, will help lower costs and improve the offering to customers. 

And for TeleCity shareholders, this deal is great news. It’s estimated that synergies from the deal will save the enlarged group £600m, a sizeable sum — around six times TeleCity’s annual pre-tax profit.

Still, as of yet information regarding the deal is thin on the ground. However, looking at Interxion and TeleCity’s historic figures, the enlarged group’s appears to have bright prospects. Indeed, for the past five years, both TeleCity and Interxion have reported revenue growth in the region of 10% to 15% per annum.

When combined, the enlarged group should be able to accelerate this growth rate as customers are drawn to the improved product offering. TeleCity is currently trading at a forward P/E of 22.5, which looks expensive at first glance but the company’s rapid growth is worth paying a premium for. 

The post Why Redrow plc And TeleCity Group Plc Are Surging Today appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Rupert Hargreaves has no position in any 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.