Charter agrees to £471m takeover by Lincoln

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The Independent Online

Charter, the engineering company, yesterday agreed to a £471m cash offer from America's Lincoln Electric Holdings, to create the world's biggest welding equipment group.

The UK company, which dates back to 1889 when it was founded as the British South Africa Company by Cecil Rhodes, said that its depressed share price had prompted it to endorse the 500p-a-share offer. The company existed mainly as a mining finance business until the 1980s, when it branched into engineering.

Nigel Smith, Charter's chief executive, said: "Our prospects have improved but our share price has remained stubbornly low. This deal is a personal disappointment, as it has happened because the stock market undervalued us, but the price achieved gives me professional satisfaction."

The offer is at a 105 per cent premium to Charter's closing share price of 243.5p on Tuesday. Five years ago, its shares traded above 900p.

David Larkam, an analyst at Albert E Sharp Securities, said: "Shareholders will be relieved to get out at £5."

However, he said the price did not look as generous when measured as a multiple of earnings. The offer, which comes with irrevocable undertakings representing 31 per cent of Charter's share capital, is worth 12.5 times City earnings forecast for the current year.

Mr Larkam said that the major question mark over the deal was regulatory clearance and how long that might take. He said that would be one reason why investors sold shares for less than 500p yesterday - 23.5 million changed hands, with a closing price of 467.5p.

"The big issue now is whether it will go through, not whether someone else will come in," he said.

The move would double Lincoln's share of the world welding products market to 20 per cent. US regulators can put takeovers in doubt because of the length of time taken to resolve competition issues.

Jim Schilling, vice-president of corporate development at Lincoln, said he did not believe that the combined group would be forced to make substantial disposals to satisfy regulators.

He also said that Lincoln had not yet decided whether it would retain or sell Howden, Charter's industrial fans division and its only remaining substantial interest outside welding. It sold its specialist engineering division last year.

"We were interested in the welding business - we're a welding company. But we have identified real value in Howden. We need to decided whether to make this a second core business for us."

Mr Schilling said that the rationale of the deal was to expand Lincoln's geographical reach. Charter is strong in Europe. Lincoln's main facilities are in the US, Canada and Mexico.