Dalgety shores up defences on takeover talk

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The Independent Online
Dalgety, the troubled Winalot and Felix petfoods group whose shares have been devastated by two profits warnings in three months, has been preparing a bid defence in anticipation of a hostile takeover attempt.

Richard Clothier, Dalgety's chief executive, has been working closely with Lazards, the group's financial adviser and Cazenove, its broker, on how best to fight any break-up bid which analysts say could value the group at pounds 1bn, the equivalent of 350p a share. The shares closed at 250.5p on Friday, valuing the company at pounds 730m.

News of Dalgety's contingency plans come as the company yesterday denied any knowledge that ING Barings, the investment bank, plans a pounds 900m break- up bid.

The bank is understood to have approached several large food groups such as Nestle, Associated British Foods and Ralston Purina of the United States, to see if they would be interested in buying all or part of the group.

The deal would see one of the companies make a bid for Dalgety and then sell off the unwanted operations to other food groups. Nestle and Ralston Purina might be interested in Dalgety's pet food businesses while ABF, Garry Weston's food combine which has a pounds 5bn cash pile, may be keen to snap up the animal feeds and fertilisers interests. It may also be interested in the ingredients division.

Though Dalgety says it is unaware of Barings' plans, the fact that it is already planning to shore up its defences makes it clear that it has been expecting a bid. Several brokers, including UBS have recently issued circulars placing break-up values of around 350p on the group.

Dalgety shares have been as low as 220p but rose by almost 15 per cent last week. Though turnover in the stock was relatively low there was one buying order from an institution which picked up 2 million shares.

In its defence Dalgety will claim it has been the victim of exceptional circumstances such as the BSE scare and a European ban on the export of petfood. The defence could see Dalgety jettison its food ingredients business, the milling operation and possibly the Pig Improvement Company, a meat group seen as one of Dalgety's best businesses.

Mr Clothier said at the time of the last profits warning that disposals were possible. Though he has said there are "no sacred cows", a decision to sell the petfood business would almost certainly see his departure as he has built his whole strategy on this sector following the group's pounds 470m acquisition of Quaker's European petfoods businesses two years ago.

Dalgety is vulnerable to a bid after a terrible performance in the last year which has seen its shares fall from around 350p to 250.5p. In May it issued a profits warning caused by production problems and the on-going effects of the BSE crisis.

Last month it issued a further warning due to disappointing trading.