Melrose moved closer to its goal of buying Charter International yesterday, with the engineering group agreeing to open its books after the manufacturing buyout firm raised the value of its possible offer.
The new proposal would see Melrose paying 850p per share for Charter, against 840p previously.
Charter shareholders would also be allowed to keep the interim dividend of 8p per share that was declared in July. The cash and shares approach values the business at about £1.43bn.
In response, Charter has opened its books to Melrose, although the bidder is yet to secure the backing of the Charter board.
The engineer, which spurned previous approaches from the buyout firm over the summer, also said that "in due course", it would seek an extension of the 6 September "put up or shut up deadline" that the Takeover Panel had imposed on Melrose at Charter's prompting. The absence of an extension would have forced the bidder to make a formal offer or walk away for at least six months.
Although Charter did not give any clues on the progress over a rival approach revealed last month, analysts said Melrose appeared to be on track to buy the business. "Given the uncertain macroeconomic backdrop, Charter shareholders may be inclined to accept this offer and enjoy the exposure to Melrose shares as it extracts the potential value from Charter," Scott Cagehin at Numis said. Investors appeared to agree, with David Miller, partner at Charter shareholder Cheviot Asset Management, saying: "It seems a sensible deal for both. Charter shareholders get a slightly improved offer, which, given market conditions, is attractive. Melrose, by making a slightly improved bid, gets to see the books. This is an important concession for Melrose shareholders, who will want to know that there aren't any surprises."
Melrose, which bought FKI in 2008, first approached Charter after a profit warning triggered sharp falls in the engineering group's shares in June. The profit warning was followed by the resignation of the then Charter chief executive Michael Foster. Days afterwards, it emerged that Melrose had come forward with a preliminary offer of 780p per share. That was rejected and in July Melrose upped the figure to 840p.