Dixons tipped to gatecrash pounds 92m Action offer

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The Independent Online
COMPUTER RETAILER Dixons was yesterday tipped as a possible counterbidder for Action Computer Supplies, the UK's leading IT distributor, after Action recommended an all-paper offer worth pounds 92m from Arizona-based computer company Insight Enterprises.

The possibility of a bid from a UK company means Action's shareholders may have an alternative to swapping their London-listed shares for Insight's Nasdaq-listed paper.

The deal aims to make Insight a global brand in the supply of IT equipment via mail order, telesales and the Internet. The group considers the Insight brand to be the stronger of the two.

"This isn't over yet," said Richard Dyett, technology analyst at brokers Investec Henderson Crosthwaite. "Action is not a glamorous business, but its management know the costs of their operation to the nearest penny. Dixons and Computacenter may be interested."

Peter Whiting of Williams de Broe said: "Action's customer base stretches from domestic to corporate users and Dixons and Computacenter would only be interested in particular parts of the business."

However, Henry Lewis, Action's chairman, said the board had given irrevocable undertakings in respect of their holdings representing around 12.5 per cent of issued share capital. "I'd be amazed if another offer came along as good as this," he said.

The offer of 0.16 Insight shares for every Action share represents 269p a share at yesterday's exchange rates after Insight stock gained on the announcement. Action shares added 41.5p to 245p.

Mr Lewis, whose role in the proposed new entity is under negotiation, said the company had rejected approaches from several UK and Continental bidders. The Insight offer was in the best interests of all stakeholders because the two companies' cultures were complementary, he said.

Tim Crown, Insight's president, said the merger would give the new company the scale to compete aggressively on price in the mature direct sales markets of Western Europe.

Dell Computer Corporation pioneered the sale of its personal computers over the Internet, and Insight aims to replicate its success by offering a range of IT brands.

Action shareholders who decide to hold out for a higher offer face the risk that Insight stock will fall in the meantime. However, Insight's rise today, and its prospects, argue that it is a risk worth taking.