Charter captures Esab with improved offer: Recalcitrant Swedish shareholders agree to pounds 286m

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The Independent Online
CHARTER, the industrial group, has won over disgruntled Swedish institutional investors in Esab by increasing its agreed offer for the Swedish welding equipment maker by 10 per cent to Skr3.4bn ( pounds 286m).

Charter lifted its offer from Skr345 to Skr380 a share after four days of negotiations with five recalcitrant Swedish shareholders representing 20 per cent of the shares.

As they fell into line, Charter announced it had acceptances equivalent to 84 per cent of Esab's voting shares. Charter already had the agreement of Incentive, the Wallenberg family industrial group and Esab's controlling shareholder with 49 per cent of the votes.

But this provoked protests from leading Swedish investors that Esab was being sold too cheaply.

The stock market welcomed Charter's successful revised deal, lifting its share price 15p to 770p. Since the proposed acquisition was announced at the end of June Charter shares have risen by more than pounds 1, or 15 per cent, as analysts projected a significant enhancement to Charter's earnings from Esab.

Charter is assuming pounds 150m of debt with the purchase. It is funding the deal from its pounds 156m cash pile from the sale of its stake in Johnson Matthey three years ago, and a pounds 93m rights issue.

Although repeatedly insisting that he saw no reason to increase the original offer, Jeffrey Herbert, chief executive of Charter, was in Stockholm from last Tuesday to Saturday night negotiating with 4th National Pension fund, which represented the interests of the dissident shareholders.

'Since we made our first offer the Swedish stock market has risen 8 per cent and the premium over the market that we were offering for Esab had fallen from 20 to 10 per cent. At the same time the fortunes of the company itself had genuinely changed as shown by their forecast of full-year profits 20 per cent higher than expected,' Mr Herbert said.

Last week Charter extended its offer until this Friday, having gained acceptances equivalent to 53 per cent of Esab's votes. Mr Herbert said it would not have been sensible to continue with a large quoted minority in Esab in the years ahead.

Geoff Allum, analyst with NatWest Securities, said that although Charter had increased its offer by 10 per cent he expected the Esab deal to increase its earnings by 18 per cent in the current financial year and by 22 per cent in 1995/6.