July 3 Shares of Corporate Executive Board Co rose as much as 14 percent on Tuesday after the research and advisory company said it would buy UK-based talent management company SHL, and at least one brokerage raised its price target on the stock citing better growth prospects for the merged company.
CEB on Monday said it will buy SHL from private equity firm HgCapital Trust Plc for $660 million in its largest acquisition yet to boost its talent management business.
Baird Equity Research raised its price target on the stock to $48 from $44 saying the deal will enhance the company's growth prospects through increased exposure to higher-growth markets.
The deal will also help CEB lower its dependency on the Americas and expand its presence in the Asia-Pacific region, analyst Daniel Leben wrote in a note.
"We believe the increased geographical diversification and exposure to fast-growing Asia-Pacific is a net positive longer term, although we believe investors will be concerned about the increasing European exposure in the near term," Leben said.
UK-based SHL is half the size of CEB in terms of revenue but the number of corporate customers it has - more than 10,000 - is almost double that of CEB.
CEB will also benefit from SHL's higher-margin profile of 28 percent, which is higher than CEB's 24 percent, Leben said.
CEB said it expects the deal to add to its 2013 earnings.
Shares of the company were 11 percent at $46.28 in morning trade on Tuesday on the New York Stock Exchange. (Reporting by Supantha Mukherjee in Bangalore; Editing by Supriya Kurane)