KKR takes a pounds 94m stake in TI

KOHLBERG Kravis Roberts, the New York-based buyout specialist, yesterday announced it was paying pounds 94.4m for a 4.9 per cent stake in TI, the specialist engineering group, saying the stock was fundamentally undervalued.

Shares in TI jumped 8 per cent to 445p in response to the move, which took the form of a placing of new shares at Wednesday's closing price of 400p. Most engineering stocks rose in response, pushing up valuations by 1.22 per cent.

Henry R Kravis, one of Wall Street's best known whizz-kids, will join TI as a non-executive director. The company said there was a standstill agreement at 9.9 per cent, requiring KKR to get the permission of TI's management for further purchases.

Mr Kravis said: "TI is a company we have been watching with great interest since we undertook two transactions with them in the late 1980s. We have been very impressed with their clear strategy and the development of a global and successful business. We plan to work closely with them to help implement their acquisition plans."

Sir Christopher Lewinton, chairman of TI, said there were no plans for a takeover or a buyout and insisted there would be no change in strategy as a result of the purchase.

"We hope the 5 per cent will help the other 95 per cent. KKR bring things to the party and to the company, things that we wouldn't otherwise have. We can use their market intelligence and we will have access to finance which will allow us to accelerate our acquisition program."

Sir Christopher said the company would be interested in buying LucasVarity if TRW, its prospective owner, decided to spin off the aerospace business. "Yes, we would be interested. It would make a great fit, but we don't know if it's up for sale yet."

TI's executives portrayed the move as a vote of confidence from KKR, following a long-standing relationship with the investment group.

KKR's links with TI stretch back to 1986, when TI bought Houdaille, an engineer then owned by KKR. TI sold some of the business back to KKR, retaining John Crane, an engineer specialising in high-performance seals and couplings for industrial use. TI's acquisitions are central to its strategy. In the last year it has made five - including pounds 270m on EIS, an aerospace and seals business, and pounds 97m on Lips, a marine propulsion company.

Analysts said that the deal had successfully overshadowed results, brought forward to co-incide with the announcement, that came in under expectations. Profits rose 7 per cent, to pounds 238.6m, and dividends were up 8 per cent to 15.9p a share.

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