Danone offer wins backing from United Biscuits' directors

A FRENCH-LED consortium affiliated with Danone, the food group, appeared yesterday to have the upper hand in the bid battle for United Biscuits after the snack group's independent directors backed its 265p a share offer.

Finalrealm, which is also backed by BNP-Paribas, Cinven and Deutsche Bank, tabled its 11th-hour offer on Thursday night, topping two earlier bids from Burlington Biscuits, a rival US group. The Burlington team, comprising Hicks, Muse, Tate & Furst and Nabisco, yesterday urged UB shareholders to take no action, saying it was reviewing its options.

Sir Gordon Hourston, UB's chairman, said: "We are pleased to have reached an agreement with Finalrealm on the terms of an offer, which will provide excellent value for United Biscuits shareholders."

Finalrealm said its offer, which values the maker of Hula Hoops and McVitie's biscuits at pounds 1.2bn, would entitle shareholders to an interim dividend of 3.6p.

However, City dealers said Finalrealm's attempts to build a stake in UB had met with a cool response from the group's investors. They added that Deutsche Bank had tried to buy 15 million shares, around 3 per cent of UB, but only managed to pick up four million as large UB shareholders awaited a higher offer from Burlington.

One analyst said: "We have a couple of testosterone-driven financial buyers behind this, so the price could still go up."

Sir Gordon's comments followed an earlier recommendation for shareholders to accept Burlington's initial bid of 245p a share, valuing the group at pounds 1.16bn. Burlington later increased its offer to 254p and said it expected UB's recommendation to be "a formality".

One potential stumbling block for the Finalrealm team is the requirement for the group to gain more than 50 per cent acceptances from UB shareholders.

Burlington controls about 35 per cent of UB's equity, having acquired 29.9 per cent from institutions and gained irrevocable undertakings representing 4.5 per cent from Phillips & Drew.

But if Burlington gives in to the French it would be entitled to a pounds 7m break-off fee and after buying its stake in UB for under 255p a share, would walk away with a total gain of more than pounds 20m.

UB shares yesterday hovered below Finalrealm's offer price, ending at 9.5p to 265.5p.