Kenwood warning raises bid spectre

Kenwood Appliances, the maker of the Kenwood Chef Mixer, looked vulnerable to a takeover bid yesterday after the domestic appliance maker issued another profits warning and said its managing director was to leave after little more than a year in charge.

Kenwood shares lost a third of their value in early trading but recovered to close 22p lower at 164p as the market sensed that Pifco might renew its bid interest. Pifco, the rival appliance group, approached Kenwood twice about an agreed deal last year but withdrew after being rebuffed.

Pifco's directors were in Stockholm yesterday and issued no formal comment. However, City analysts suggested that with Kenwood shares now at their lowest point since the company's flotation in 1992, Pifco might move in for the kill.

After yesterday's 12 per cent slump in the share price, Kenwood is worth pounds 75m. Pifco's shares closed unchanged at 268p yesterday, valuing the company at pounds 45m.

Kenwood said that following a poor performance in the Christmas and January sales periods, profits in the second half would be significantly lower than the pounds 3.3m achieved in the first half. Analysts forecast full-year profits of pounds 4.5m.

Though the group has maintained market share, trading in western Europe is difficult and margins are under pressure. The strength of sterling has also had an adverse impact.

As a result of the latest downbeat message, managing director Tim Beech will leave the company next month. He will receive compensation for loss of office. He is on a two-year contract and last year received total pay of pounds 170,000 including bonuses.

He will be replaced by Colin Gordon, who joins from branded food and drinks group Grand Metropolitan. He has been a director of the group's IDV drinks subsidiary for the past 10 years.

Kenwood's rebel shareholder group, UK Active Value, which campaigned for the group to be put up for sale last year, applauded the shake-up. Julian Treger, one of the fund's advisers said: "We regard this as a positive set of announcements which are exactly the strategy we suggested to both management and shareholders last year. Clearly, Kenwood needed a change in management and an operational restructuring."

Another large institutional shareholder said that while a takeover was possible, the new management would be given a chance to prove themselves. "We've got a new chief executive. All we want now is a strategy. We'll have to listen to what they have to say."

Pifco made two informal approaches to Kenwood last year. It stressed it was interested only in an agreed deal.

In December UK Active Value requisitioned an extraordinary general meeting at which it proposed Kenwood should put itself up for sale. Shareholders voted overwhelmingly against the motion.

However, some analysts suggested that following yet another profits warning investors might now take a different view.