Bottom Line: Bid rule creates a silly situation

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The Independent Online
THERE are good reasons for demanding that anyone who acquires more than 30 per cent of a company should make a bid for the rest of the shares.

Small investors get the same price as the big boys and they share in the premium that a bidder rightly has to pay for control.

Of course, from time to time strict rules create silly anomalies, and there are few apparently sillier than the non- bid that is at present being fended off by Watts Blake Bearne, the world's biggest supplier of ball china to the ceramics industry.

It looks silly because Sibelco, a Belgian sand producer, is bidding only because the Takeover Panel has said it must.

Last month it acquired a 15.6 per cent stake from another shareholder which, added to its existing 14.8 per cent stake, took it over the mandatory bid limit.

A third investor has said it will sell its shares to Sibelco to take its stake to a guaranteed 45 per cent.

The fact that this three-way concert party could not find a buyer for its combined stake might suggest that the 420p price is generous.

Also, few other shareholders would wish to be in the position of an oppressed minority in future.

But yesterday's profit forecast from Watts Blake, pointing to a 19 per cent increase in profits and a 12 per cent dividend rise, suggests that the current team is indeed doing a good job.

The company enjoys access to some of the most buoyant markets in the world, and has valuable reserves and a robust balance sheet.

M&G, which holds 7 per cent, has typically come out in support of the company. Its unhappiness with the price being offered is understandable - 420p was a reasonable price to pay for a minority stake, but a prospective p/e of 16 is less than the sector average and hardly represents a decent premium for control.

At 434p, up 9p on the rejection document, Watts shares should continue to be held.

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