Chubb price tag hits Williams shares

Williams shrugged off criticism yesterday that it was overpaying for Chubb as the market gave its agreed pounds 1.23bn takeover bid an initial thumbs- down by marking its shares sharply lower. Five years ago Williams narrowly failed to buy Racal, which then owned the locks and alarms group, for little more than half its latest cash and shares offer.

Roger Carr, chief executive, pledged pounds 40m of integration benefits by the end of next year and said achieving that level of profit enhancement would sharply reduce the apparently demanding multiple of earnings its recommended bid implied. Analysts thought that was a conservative estimate of the benefits of merging the two businesses.

While welcoming the commercial logic of the deal, however, a 10 per cent fall in Williams' after the deal was confirmed underscored worries about the price being paid. With no underwriters for the share element of the combined cash and paper offer, yesterday's 35.5p tumble in the value of Williams' shares to 302.5p wiped almost pounds 70m from the value of the offer.

The acquisition of Chubb, which still has to clear regulatory hurdles in a number of different territories, creates the world leader in fire protection and security. It puts Chubb's mainly old-Commonwealth businesses together with Williams' Yale and Kidde brands, both strong in North America. Mr Carr said it was a perfect fit, giving an important boost to Williams' ambitions in the Far East, where Chubb had created a strong business from its Australian base.

Williams' offer, which it said represented a 37 per cent premium to Chubb's market value before rumours of the deal sent its shares soaring earlier this week, is based on two Williams shares and 704.12p in cash for every three Chubb shares. After yesterday's fall in Williams' share price yesterday, the bid valued Chubb at 435.7p a share, or pounds 1.23bn. Chubb's shares closed yesterday 5p higher at 425p.

The jump in Chubb's share price on Thursday by 79p, or 23 per cent, to 420p is being investigated by the Stock Exchange. News of the proposed bid is thought to have leaked after Williams put in place a new pounds 1bn banking facility earlier this week.

Williams also made a forecast of its 1996 profits yesterday, estimating profit before tax and exceptional items of pounds 243m from sales of pounds 1.82bn. Earnings per share are expected to be 39.1p, or 24.1p adjusted for a pounds 97m exceptional disposal profit, and a final dividend of 9.25p will be proposed.

As well as improving Williams' geographical spread, Chubb takes the group into new security and fire protection product areas. In addition to shared areas such as fire extinguishers, locks and control panels, Chubb has strong positions in electronic monitoring and manned guard services which will complement Yale and Kidde's leading positions in hotel security and hazard sensors.

Mr Carr said pounds 26m of the expected pounds 40m two-year profit-enhancement programme would come from integration benefits such as the consolidation of regional corporate administration. At least pounds 7m would come from better operational performance, where Williams is expected to have plenty of scope to increase Chubb's lower margins. A further pounds 7m is slated for profits from additional sales as the combined companies benefit from wider distribution channels. The cost of achieving those on-going benefits will be a one-off pounds 30m.

Market Report, page 24

Start your day with The Independent, sign up for daily news emails
Voices
voices
News
general electionThis quiz matches undecided voters with the best party for them
Arts and Entertainment
Keira Knightley and Matthew Macfadyen starred in the big screen adaptation of Austen's novel in 2005
tvStar says studios are forcing actors to get buff for period roles
News
Prince William and his wife Catherine, Duchess of Cambridge show their newly-born daughter, their second child, to the media outside the Lindo Wing at St Mary's Hospital in central London, on 2 May 2015.
news
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before