Hostile pounds 188m Canadian bid set to capture Watmoughs printing grou p

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Watmoughs yesterday became the subject of a hostile bid from its Canadian rival Quebecor Printing. Although the printing group wants to retain its independence, Peter Thal Larsen says disappointed shareholders are unlikely to back the company's beleaguered management.

The bid values Watmoughs at 257p a share, or pounds 188.3m, a premium of 30.1 per cent to the closing share price the day before the bid. Watmoughs shares promptly surged to 287.5p, suggesting that investors expect the company to squeeze a higher price out of Quebecor.

However, the bid was overshadowed by the news that Pierre Peladeau, Quebecor's chairman, 72, had suffered a heart attack late on Tuesday night. He is currently in a coma in a Montreal hospital.

Charles Cavell, president of Quebecor's international operations, suggested that the group would be willing to pay more for an agreed deal. "We are still very keen to secure the Watmoughs board's approval," he said. "My door is always open."

Agreement looked unlikely, however, after Watmoughs' board unanimously advised investors to reject the offer, suggesting that the company had turned the corner. "The action we have taken is bearing fruit," the chief executive, Patrick Walker, said. "The future of this business is best as an independent organisation."

The two parties held exploratory talks about a deal earlier this week. According to Quebecor, they foundered over Watmoughs' price expectations, which it said were "wholly unrealistic". Watmoughs shares have fallen sharply this year after the group, which prints Hello! and The Sunday Times magazines, among others, issued two profit warnings in short succession.

Analysts said that shareholders were unlikely to back the management's bid to remain independent. "Watmoughs is rudderless, it has a very old board, and will have to invest large amounts of capital in the next few years," said one expert. "Being left without a bidder would be a terrifying prospect for Watmoughs shareholders."

Quebecor said consolidation was necessary in the fragmented European market. The continent has 71 separate printers, while the US has just four. "The market is one market. It is not a dream but a reality," Mr Cavell said. He also said that printers would have to install larger printing presses to remain competitive. But Watmoughs rejects this. It argues that for time-sensitive printing projects, such as magazines, the market is not international. "Size for size's sake is not part of our strategy," Mr Walker said.

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