Compass leaks to be investigated: Snubbed rival blamed for rumours about purchase and cash call

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The Independent Online
THE Stock Exchange is believed to have launched an inquiry into the leak this week of Compass Group's pounds 300m purchase of IM Vending in the US and a pounds 150m rights issue, both of which were formally confirmed yesterday.

An industry source said yesterday that the leak originated from a competitor in the US, smarting from not being invited by Flagstone, owner of IM, to tender a rival bid. Neither the Stock Exchange nor Compass would comment.

Meanwhile, a promise of a dividend increase by Compass, the contract catering group, helped to dissolve some of the City's resentment of the cash call and the acquisitive drive into the US market.

Compass shares, which fell 13p on Tuesday after it confirmed rumours that it was in takeover talks, eased 6p to 310p. The rights issue is on the basis of 6-for-19 at 270p a share.

Some analysts, however, were not won over by a projected 10 per cent dividend lift and claims by Compass that the purchase would enhance earnings. 'The company's risk profile is certainly raised by this deal,' said one analyst.

Francis Mackay, chief executive, said the chance to buy the third- largest contract caterer in the dollars 72bn-a-year US market was too good to miss. 'Being 14th is hard work. We now have the opportunity to be a market leader,' he added.

He also announced that Compass, aided by last year's purchase of SAS airport catering in Scandinavia, lifted pre-tax profits by 28 per cent to pounds 23.3m in the half-year to 3 April. The interim dividend is up by 9 per cent to 2.31p. Compass expects to pay a minimum final dividend of 4.5p on the enlarged share capital.

Mr Mackay said there were two main reasons for buying IM Vending, which trades as Canteen: access to a large and expanding market, and the opportunity to buy an established and substantial cash- generating business.

IM comes debt-free. In 1993 it made operating profits of dollars 38m ( pounds 25m) on dollars 1.05bn of turnover.