Cook v Triplex: sit tight for the next round

City Talk

Cook v Triplex: sit tight for the next round

The fate of embattled engineering group William Cook (325p) rests in the hands of probably no more than three fund managers, who between them own more than 35 per cent of the business.

Seven of the largest shareholders own more than 60 per cent, an unusually large concentration of holdings.

Phillips & Drew Fund Managers is the biggest of the shareholders, with a 21 per cent stake. PDFM has a mixed reputation when it comes to backing the incumbent management in a bid. But it may be that the fund managers had spotted what William Cook chairman, Andrew Cook, has been saying in response to the bid from Triplex Lloyd: that Cook's is a fundamentally undervalued business.

On first sight, Triplex's opening offer seems to value Cook on generous terms. With a 30 per cent premium to where the shares had closed the previous night, investors have to go back to 1991 to find the shares at this level.

But the deal only implies an historic exit multiple of just over 10 times 1994-95 earnings - hardly staggering. And Mr Cook says much of the reason behind the flat dividend and earnings growth of recent years is the drag on profits from a heavy four-year investment and modernisation programme, which ends this year. He emphasises that "shareholders who stick around will be rewarded."

The offer is seven new Triplex shares and pounds 13.50 for every nine Cook shares. Shareholders will also be entitled to retain the 2.75p interim dividend. There is a 295p cash alternative. Triplex closed at 208.5p, up 11/2p, but Mr Cook will fight every inch of the way. There could, therefore, be more surprises than those in the Triplex corner would have expected. Hang on for further developments.

HALF-YEAR figures from WT Foods (26.5p) last week show the new management, led by chairman Philip Lovegrove, installed in April, are in command of the situation. Pre-tax profits were up 34 per cent to pounds 753,000, before exceptionals, while earnings per share of 0.95p, up from nothing, will further restore calm among anxious shareholders. In January, a non-competitive agreement with French food group Danone not to deal in Indian and Chinese food comes to an end. The upshot should be that further expansion of WT's ethnic brands can take place. One to watch.

ANOTHER OFEX offer sees subscriptions open tomorrow for shares in Sardis International - a company that can reproduce the effect of a bee flying around a room through your stereo speakers. The company specialises in so-called ambisonic sound. As the prospectus explains, first there was mono, then stereo, and finally there came quadrophonic - a commercial failure, partly because although an improved sound, it was difficult to listen to over a long period of time. Ambisonic is more advanced than quadrophonic, but its great commercial appeal is that it can be played over mono or stereo systems. The shares go on offer at 10p, and the company hopes to raise up to pounds 375,000. Best left to the hi-fi buffs, but it could just be the start of something big.

EMAP, the publishing group, looks set to shrug off concerns about boardroom bust ups, in the wake of another set of sparkling interim figures. Pre- tax profits soared 34 per cent to pounds 50.6m. While the conflict saw the shares (752.5p) drop substantially, they have now begun to recover. The City was rightly concerned at the outbreak of hostilities, but the difficulties seem to have been simmering for a long while - so perhaps this was a creative tension that did as much good as harm. Either way, with the company's strong track record, the shares remain a buy.