Kvaerner launches Amec bid

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The Independent Online

The Norwegian industrial group Kvaerner has launched a hostile bid for UK construction group Amec, which yesterday terminated merger talks with its UK rival Alfred McAlpine.

Amec said the offer, expected to be worth about pounds 375m once a price has been put on the large number of preference shares in issue, "fundamentally undervalued its potential".

Kvaerner is interested in Amec's oil and gas interests, and intends to dispose of the housebuilding business, Fairclough Homes, and other development operations. The Norwegian company, which owns the Govan shipyard in Scotland, said its pounds 1-a-share offer would be open for 21 days - not the normal 60 - leaving Amec little time to rush out a defence. Kvaerner yesterday bought another 2 per cent of Amec, bringing its holding to 14 per cent, and follows last Thursday's dawn raid, which lifted its stake from 2 to 12 per cent.

Amec had tried to reach an agreed merger with McAlpine, but these talks fell apart yesterday when the McAlpine board "unanimously rejected" Amec's all-share offer.

Several analysts felt that Amec would struggle to mount a solo defence. "It is going to be pretty hard, given the state of the markets," said Howard Seymour. "Nor may investors believe in the long-term future for contracting at the moment." Another analyst said that Amec's defence would be "wafer-thin".

Kvaerner's offer of pounds 1 a share values Amec's ordinary capital at pounds 202.6m, a 28.2 per cent premium on last Wednesday's closing price. The preference shares are worth about pounds 172m. Kvaerner said: "Proposals will be made to preference shareholders within seven days."

Kvaerner and Amec are among the leading suppliers of equipment to the North Sea oil and gas industry, and the UK company is also strong in Asia and South America. Kvaerner, which has a market value of NK9.7bn (pounds 995m), wants Amec's contracting expertise, which would help the company embark on large turn-key projects around the world.

Erik Tonseth, Kvaerner's chief executive, said: "We believe the skills that Amec will bring to the combined group will enhance the prospects for both Kvaerner's business and those of Amec. A combination with Kvaerner will provide Amec with opportunities that would not otherwise be open to it."

He added that there would be no large rationalisation programme, and declined to put a value on the companies likely to be sold off.

Amec shares closed just 2p up at 98p, indicating that the markets felt Kvaerner has no intention of raising its offer. Amec's two-for-one share offer to McAlpine was worth about pounds 133m and implied a value of about 70p per Amec share.

Amec said that it had been discussing a deal with McAlpine for some weeks, and first proposed an offer on 24 November. Analysts believe those talks could restart if Amec escapes the clutches of Kvaerner.