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Fresh bid for Newman expected

Speculation persisted last night among industry insiders that the takeover battle for Newman Tonks was far from over, despite the decision by FKI, the acquisitive engineer, to withdraw its bid for the building products group.

FKI's decision came two days after Ingersoll-Rand, the US industrial equipment giant, launched an agreed pounds 230m takeover of Newman that topped FKI's cash and share offer.

But Ingersoll may not be home and dry yet. Analysts noted some small buying of shares in Newman Tonks over the last couple of days at prices above the US group's 179.4p a share offer, suggesting another bidder may want to enter the fray.

Several other companies, including Swedish locks manufacturer Assa Abloy, are known to have considered making an offer since FKI launched its bid before Christmas.

It also emerged last night that Newman Tonks had incurred bid costs of about pounds 6m - almost one-third of its 1996 forecast profits. For its part, FKI had spent pounds 5m, mainly on underwriting fees.

In a statement FKI said that its bid would lapse with immediate effect because confidential information supplied by Newman Tonks following Ingersoll Rand's announcement contained nothing new. The conditional rights issue to fund the proposed deal is also being abandoned. "It is clear to us that a higher offer would not create sufficient value for our shareholders," Jeff Whalley, FKI's chairman, said.

Newman Tonks welcomed FKI's decision. "I don't want to gloat but I have always maintained that there was no price or commercial logic in their offer," Geoff Gahan, chief executive, said.

The lapsing of the offer means the shareholders speaking for 21 per cent of Newman who had already accepted the FKI offer are free to accept Ingersoll- Rand's higher price. These include M&G, Newman's biggest shareholder with an 11.2 per cent, who took the highly unusual step of irrevocably accepting FKI's offer on the day it was launched.

Shares in Newman Tonks fell 2p to 178.5p, but FKI rose on the news, closing 3p higher at 198p, largely on relief among investors that the Halifax- based group was not overpaying in its first hostile takeover. "FKI sensibly have not come back," said Colin Campbell, an analyst at ABN Amro Hoare Govett. "They have always said they would only do an earnings enhancing deal."

Analysts had feared that FKI was in danger of returning to the ill-fated late 1980s buying spree that culminated in the takeover of Babcock International, which was demerged within two years.