The UK speciality chemicals company was yesterday forced to confirm that it was in takeover negotiations after weekend press speculation of a bid by Clariant had triggered a huge rise in its long-suffering share price. Laporte's admission extended the rally and the stock closed over 29 per cent higher at 762.5p
Laporte, which produces high-quality chemicals for toothpaste, paints and condoms, declined to name the potential bidder, saying simply that it was in discussions over "a possible offer being made for the company".
However, insiders said that Laporte's executives were locked in talks with Clariant, the chemical giant which last year dropped plans for an $8.7bn (pounds 5.4bn) merger with its Swiss rival Ciba Speciality Chemicals. The two sides were hoping to clinch the deal before Friday when Clariant is due to report its annual results. Clariant declined to comment.
Most city analysts said that Clariant was set to draw on its large cash pile to table an offer of at least 800p for each share in Laporte, valuing the UK group at over pounds 1.5bn. However, some industry experts said that Clariant's interest could trigger a bid war which could push the final price to over pounds 1.8bn. They said that the Swiss group could be challenged by a cash-rich US rival.
Mike Eastwood, at Dresdner Kleinwort Benson, said that Laporte's price tag was high because of the good quality of its business. "They are paying a full price, but Laporte has probably the highest-quality portfolio of assets in Europe."
The British group underwent a radical restructuring following the arrival of chief executive Jim Leng in 1995. Through a series of acquisitions and disposals, Mr Leng reduced Laporte's dependence on cut-throat commodity chemicals markets and transformed it into a high-margin speciality chemicals business. Mr Leng's strategy, which caused some 2,000 job losses, culminated in last year's pounds 600m acquisition of Inspec, a highly rated UK fine chemicals group.
Speciality chemicals, used in the pharmaceuticals and electronics industry, are more sophisticated than commodity chemicals and less prone to the vagaries of the economy. The chief executive's changes have been praised by analysts but have not been reflected in Laporte's share price, which last year underperformed the market by up to 50 per cent.
Industry experts said the new-look Laporte would be a perfect fit for Clariant and would cause few competition problems. Last year, the Swiss company said it wanted to expand in the fast-growing fine chemicals and electronic chemicals markets.