Chloride kicks off bid defence with strong full-year results
Tuesday 25 May 2010
The back-up power group Chloride yesterday came out fighting following last month's takeover approach from Emerson as it unveiled a strong set of results. This prompted analysts to suggest the US group would have to up its bid by more than 20 per cent.
Chloride said its rival had not returned to the table since it bid 275p per share, although Emerson's management is understood to have sounded out major shareholders over its offer. Chloride, which makes uninterruptible power supply (UPS) systems, posted full-year numbers that came in right at the top of analyst expectations. Sales at the group in the year to the end of March, rose 3 per cent in 2010 to £336m, with pre-tax profit retreating 5 per cent to £41.4m.
Michael Blogg, an analyst at Arbuthnot, said: "Chloride has delivered a platform for a robust defence against any 'cheap' offer from Emerson."
He said that while Emerson may need Chloride "to fill a gap", Chloride does not need Emerson. "We expect the starting point for a successful offer from Emerson now to be substantially above 300p, which will test the latter's resolve," he concluded.
The offer, which valued Chloride at about £723m, was on the table for just three days. Shortly after management rejected the approach, Emerson released a statement making its proposal public to allow it "to directly engage with Chloride's shareholders". The US group declined to comment yesterday.
Chloride finance director Neil Warner said yesterday: "The only thing I can tell you is that we've heard no more directly from them."
Scott Cagehin, an analyst at Nomura, said Chloride had proved to be resilient in the downturn, adding that the continued bid speculation would support the share price "given the possibility of an increased offer or perhaps a counter bid from another major UPS player."
While Emerson's bid was a 34 per cent premium to Chloride's share price, it marked an increase of just 5p per share on a bid it tabled for the same company two years ago. Emerson said in its proposal that a merger of the companies made "strategic, operational and commercial sense", adding it had a "long-standing respect for Chloride's businesses". Steve Medlicott, an analyst at Altium, said yesterday, the bid would need to be raised to about 340p per share to succeed.
Yesterday's results was partly seen as a defence document against the bid, although it avoided any mention of Emerson's approach. The message was clear, that management backed Chloride's future as an independent company. Chief executive Tim Cobbold said the business had "robust long-term growth characteristics driven by growing energy demand and increasing digitisation".
He added: "We will continue to execute our proven strategy, make further careful investments to access high-growth potential markets, and develop the technology and services that meet the demands of our customers. Accordingly, the board is confident that the long-term prospects for the group are very attractive."
The London-based group traces its roots back 100 years, when it made batteries. The group shifted its focus to uninterruptible power supplies in the 1970s after it bought emergency lighting company Bardic and Transipak, which made AC industrial systems. Its clients include London Underground and Heathrow Airport.
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