Allied Colloids bids to repel US offer

Allied Colloids, the chemicals group, yesterday pledged to cut costs dramatically and raise operating margins in its bid to repel a pounds 1.1bn hostile takeover approach from Hercules, a US rival.

In its defence document Allied predicted that it could wipe pounds 5m off its raw material bill next year. The group also plans to cut costs by revamping its manufacturing facilities and introducing new technology and IT systems. However, this is likely to lead to job cuts among Allied's 3,900 strong work force, including some of the 1,900 people it employs in Bradford.

Allied insisted that the 155p-a-share offer drastically undervalued the group given its consistent improvement in sales and an increase in margins in the last six months. John Harnett, Allied Colloids' finance director, said: "We have repositioned ourselves for the battle to come. It is a poke in the eye to Hercules, we just haven't knocked them out yet."

Hercules slammed Allied's defence, claiming it had made flattering comparisons and pointing out that operating profits fell 17 per cent in the last six months compared with the first half of the financial year.

Keith Elliott, chairman and chief executive of Hercules, said: "The Allied Colloids document is uninspiring. Our cash offer continues to look very generous for a stock that has destroyed shareholder value and has consistently underperformed the FTSE All Share and FTSE Chemicals Indices."

Allied refused to comment on whether the group was looking for another bidder to act as a white knight. But sources suggest several rivals have already registered an interest in Allied.

Allied's shares were unmoved at 167p.