Small Talk: API could yet turn the tables on its predator

API's leading shareholder, the US value investment fund Steel Partners, sent Illinois Tool Works (ITW) away with a flea in its ear back in April, telling them the £68m offer was not enough - even though Steel would have doubled its money on its 29 per cent stake.

Now packaging industry gossip suggests that Steel would be willing to back API in an audacious bid for the laminations division of ITW. API and ITW are vying to be number two in the global market for manufacturing foil-coated or laminated packaging for consumer goods, including cigarettes. ITW saw the logic of putting the two businesses together. API's strengths lie in Europe and China, while ITW is big elsewhere in Asia and in the US, where API is planning to make acquisitions.

Any deal would more than double API's size, and the plot is at an early stage. Observers are hopeful that ITW would be a willing seller, since it is a sprawling conglomerate with a history of disposing of assets where growth has stalled. It had hoped to add API to its foils and laminates business to challenge for global market leadership, but since that has been blocked, it might want out all together.

API sold a number of underperforming businesses in the past 18 months, and must now focus on the nuts and bolts of manufacturing efficiency to counter what are still tough trading conditions. It will need to consider carefully whether it could handle such a large acquisition, but the fact that it is even considering such a move underscores its new-found confidence and the support of its largest shareholder.

More Longbridge woe

It's starting to look as if Longbridge is a cursed name. After the collapse of MG Rover, the recruitment firm which shares the name of the car maker's Midlands plant, Longbridge International, has had its shares suspended by the London Stock Exchange. The next piece of news, when it comes, will certainly not make pleasant reading for shareholders.

The company's nominated adviser, Noble & Co, resigned last month, triggering the suspension. But trading in the stock would have been halted in any case last week, because Longbridge has failed to file its annual accounts by the deadline. Shareholders will be concerned about the difficulty, since it comes after the company recently changed its accounting policies. The previously stated results were not conservative enough in their accounting for long-term contracts, it said.

The word is that Noble has had a falling out with Frank Varela, the founder, managing director and 27 per cent shareholder. The finance director, Bruce Page, quit at the same time, as did one of the non-executives. Noble is believed to have put a deal to the company which would have involved Mr Varela stepping down, but this was rejected.

City headhunting is a people business, and meanwhile, trading is bad. Longbridge has been in dire straits since a significant team left last year. Its replacement is taking time to bring in new contracts.

The company has promised to update the market by 18 July, but it won't be pretty.

Heel now a lost soul

The end of a historic stock market name, one of its cutest, Dinkie Heel. The company is famous for making the rubber bits on the end of high heels and other shoe parts. It was one of the world's foremost suppliers of steel toecaps, for instance, until this loss-making business was sold to management last year to stop the group's slide into bankruptcy.

But the name was changed at its annual meeting last week, for the much less cute Ceps.

It is not because the company is now something to do with mushrooms. It has turned itself into an investment company, and Ceps is derived from Chelverton Equity Partners.

It has an attractive investment strategy. It plans to snap up controlling stakes in slow-growth but cash-generative family businesses, where it will help train a new generation of management to take over, hopefully through a buyout that will bring Ceps a tidy profit. Some of the Dinkie Heel business remains, making protective gear for use in extreme sports.

The first deal after a refinancing in February was the acquisition of a 75 per cent stake in Friedman's, a converter of lycra for use in dancewear, swimwear and sportswear. More are on the way.


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