Allied Colloids renews assault on hostile Hercules bid

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The Independent Online
Allied Colloids yesterday launched a fierce attack on Hercules, the US predator that is stalking the British chemicals group. Andrew Yates analyses Allied's plans to defend itself from Hercules' hostile pounds 1.1bn bid.

David Farrar, Allied chief executive, said yesterday: "Hercules looks like it has run out of growth prospects. Its sales growth has been poor and its margins have been squeezed. They are short of ideas and they are after our new products."

His comments came as Allied spoke out against Hercules for the first time in what promises to be a long running and bitter bid battle.

Mr Farrar also revealed that Allied was committed to reducing overheads and increasing margins over the next few years as part of its bid to repel the hostile bid. He said: "We have had to spend heavily on developing our distribution systems and offices around the world which will benefit us in the future. Going forward our aim is that overheads will only grow half as fast as sales."

Hercules fired back by accusing Allied of disregarding shareholders interests. A spokesman for the group said: "They have a real cultural problem. Shareholder value doesn't seem to feature.

Hercules also slammed Allied promises to increase margins. The spokesman said: "Looking at its record you can see this is one of those jam tomorrow companies"

Allied yesterday hinted at other parts of its defence strategy. It plans to tell shareholders that it expects a strong profits uplift after the acquisition of CPS, the polymer business it bought a year ago. Allied also believes it will be able to continue to cut manufacturing costs as part of the attempt to increase margins.

"We are a high growth company working in high growth markets with a tremendous track record. Over the last two years we have put in a great deal of work to improve the performance of the company and we are just starting to see the benefits coming through," said Mr Farrar.

Allied is also considering returning money to shareholders via a share buy back or special dividend, although it has come to any firm decision as yet. "We are looking at all option," said Mr Farrar.

Hercules surprised Allied by launching a 155p takeover offer on Monday. The US group lambasted Allied for its recent poor share price performance, poor earnings per share record and the declining return on capital employed.