Laporte rides in to rescue Evode

Click to follow
The Independent Online
LAPORTE, the chemicals group, is expected to offer a mix of shares and cash in a bid for Evode, the adhesives company already under siege from Wassall.

After it bought a sizeable chunk of Evode in the market speculation grew that Laporte would agree a bid worth around 105-110p a share by next week, but a hostile bid was not ruled out.

Yesterday's announcement that Laporte was in talks with Evode came after Wassall raised its cash offer for the company from 80p to 95p, valuing it at pounds 113m.

A Laporte bid is likely to be a mixture of shares and cash because the company is not keen to see borrowings rise significantly.

The chemicals group bought 6 per cent of Evode in the market yesterday morning at 100p. Its own shares lost 20p to close at 629p. Evode gained a penny to 104p and Wassall fell back 10p to 207p.

Ken Minton, Laporte's chief executive, said he had first discussed the two companies' futures with Andrew Simon, Evode's chairman, in the mid-1980s. Talks resumed late last year when Wassall made its bid. 'We know the company and understand its businesses,' he added.

Mr Minton said that Laporte would not bid for Evode unless it was convinced its earnings per share would be enhanced in the first year of ownership. But he believed there were huge synergies and economies of scale available to a combined operation.

He contrasted Laporte's margins in the mid-teens with Evode's low single-figure returns, saying that Laporte could cut out a lot of Evode's overheads and increase operational efficiency.

Acknowledging Wassall's claims that it had a track record of stripping out waste and improving margins, he said that Laporte's experience in the chemicals business would provide the right environment and ethos to take Evode to another stage of growth beyond rationalisation.

Wassall made no comment on Laporte's announcement beyond pointing out that its bid was still the only offer on the table.

David Ingles, chemicals analyst at James Capel, said Laporte and Evode were not an obvious fit, although they overlapped in the adhesives and sealants business. 'I don't think that Wassall would be advised to get into a contested bid - there is probably not enough left in it for them above the price they've already offered,' he said.

View from City Road, page 21