Inchcape spurns chance of extra 10% of Gestetner: Market surprised by decision but talks continue on working together

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INCHCAPE, the international services and marketing group, has opted not to increase its stake in Gestetner, the office and photographic equipment distributor, from 14.9 per cent to a potential 24.9 per cent, by passing up the option to buy pounds 37.9m of Gestetner unsecured loan stock, writes Terence Wilkinson.

The decision caught the stock market on the hop in view of recent speculation that Inchcape might eventually take control.

The news sent Inchcape shares 6p higher to 449p, after 457p, and knocked Gestetner ordinary shares down by 19p to 144p and its capital shares by 18p to 152p.

Inchcape bought a 15 per cent stake in Gestetner in May last year for pounds 40m at a price of 129p from Chiltern Capital, an Australian company which had already sold a 29.9 per cent shareholding in Gestetner to Ricoh, the Japanese office equipment manufacturer. Inchcape also paid pounds 2.9m for an option to subscribe for Gestetner convertible unsecured loan stock by 1 July to raise its stake to 24.9 per cent.

Charles Mackay, chief executive of Inchcape, said the 15 per cent stake had given the company the chance to familiarise itself with Gestetner's business and with the potential for expanding and developing the distribution of Ricoh manufactured products, which are supplied to Gestetner.

'It has become increasingly apparent that the best strategy available to Gestetner, ourselves and their other major shareholder, Ricoh, may be for the three companies to work together in developing business opportunities while generally maintaining separate distribution channels for the Ricoh and Gestetner brands. Discussions are continuing.

'However, it has already become clear that, with this strategy, it is not necessary to increase our investment in Gestetner.'

News of Inchcape's decision coincided with half-year figures from Gestetner showing a turnaround from losses of pounds 45.4m to pre-tax profits of pounds 6.6m on sales down from pounds 498m to pounds 482m. The interim dividend is 1.2p against 1.8p. In the previous year Gestetner made a pounds 48.3m provision for restructuring in Europe.