Is UGL a takeover target?

Ross Taylor, the new chief executive of engineering services company UGL (ASX: UGL), yesterday released a market update outlining his vision for a ‘New UGL’. Presumably he wants to put some distance between himself and the old UGL, which has made more than a few stuff-ups (including selling DTZ, its best business, for a song). The market approved of the announcement, sending the stock up 10% on the day. No doubt the reaction had something to do with Taylor’s intention to double operating margins to 4% by 2017. It’s an ambitious target during a resources downturn, although at that level margins will still be shy of the 5% achieved during the boom. Whether Taylor will still be chief executive in two years is debateable. If there really are margin gains to be had, UGL might become a takeover target for an engineering rival. Particularly so now that projects and contracts are harder to come by. (VIEW LINK)