Fairey poised to bag Burnfield

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The Independent Online
Fairey, the specialist engineer, looked certain to gain control of instrumentation group Burnfield yesterday after the target company's financial adviser Merrill Lynch gave a coded recommendation for an improved pounds 57.7m all-paper bid. Burnfield's shares ended yesterday's half-day dealing session 11.5p higher at 153.5p, compared with the implied 158.5p value of the Fairey offer.

Burnfield is unable to recommend the new 25-for-92 share offer itself because the Fairey bid is conditional on Burnfield shareholders voting down a separate acquisition and rights issue for which it had planned to seek shareholder approval on Monday. The seal of approval from Merrill Lynch is seen as a capitulation from Burnfield in all but name and follows the defending team's success in squeezing an improvement to the original terms of one Fairey share for four Burnfield.

Monday's meeting is expected to see an immediate call for an adjournment until shortly after the first closing date of Fairey's revised offer, which will be 14 days after the posting next week of its new offer document.

Victory for Fairey would bring to a close 1996's shortest hostile bid. The offer period, officially launched only last Friday, was truncated by Fairey's insistence that it would only go ahead if Burnfield shareholders vetoed their company's plan to launch a pounds 20m seven-for-10 rights issue to fund an acquisition of LDS, a privately owned vibration equipment group that would take it into a new business area.

In effect shareholders were forced to make a snap decision about the relative merits of the two companies and after years of underperformance by Burnfield, Fairey had little difficulty in pressing its case.

Burnfield's shares, and the income from them, have fallen by 40 per cent over the past five years. Fairey's shares, by contrast, have more than tripled over the same period despite underperformance in recent months.

The City had already shown itself to be sceptical of Burnfield's strategy. On the day the company announced its planned acquisition and cash call its shares fell 10 per cent to 100p.