Chloride's £864m offer from ABB could spark Emerson counterbid
Wednesday 09 June 2010
Chloride Group is all set for a bidding war after recommending a £864m offer from the Swiss electrical engineering group ABB, just weeks after turning down a £723m bid from US rival Emerson Electric.
The cash offer will see Chloride shareholders receive 325p per share – representing a premium of more than 55 per cent on the share price before Emerson's ill-fated approach – plus a final dividend of 3.3p per share.
Chloride's uninterruptible power supplies (UPS) to customers including Heathrow Terminal 5 will complement ABB's power equipment manufacture business, according to the Swiss company.
Joe Hogan, the ABB chief executive, said: "The combination of Chloride's strong position in the fast-growing medium to high-power UPS business with ABB's global reach and complementary power and automation offering provides significant growth opportunities for both businesses."
Chloride's management takes a similar view. Tim Cobbold, the chief executive, said: "ABB's offer is focused on driving growth and will generate opportunities to accelerate the development of Chloride's business, particularly in emerging markets."
The board's endorsement of the ABB offer stands in marked contrast to its swift dismissal of a bid from Emerson in April. Although the US group would only say it is "considering its position and would make an announcement in due course", Chlorides shares rocketed up by 19 per cent to 344.5p yesterday, boosted by speculation that it may make a counter-offer. Interest from other sources, including Eaton and Schneider, has also not been ruled out.
"All possibilities are still on the table," Nick Webster, a director of research at Numis, said. "The expectation in the market is for an improved offer, most likely from Emerson, at 340p or more."
With Chloride shareholders not due to vote on the proposal until the middle of July, Emerson has plenty of time to decide on its next move. And ABB may also go higher.
Emerson has been circling Chloride for several years. Its first 270p-per-share approach, in 2008, was rejected by the British company as too low. And a wrangle over publication of the details left a vestige of bad blood between the two groups. But Emerson was not to be deterred, and approached again in April this year. Repeating its 270p-per-share offer, the US group claimed that the combined group would constitute "a powerful force" giving Chloride sufficient scale to compete better in the long term.
But Chloride's management rejected the offer as continuing to "significantly undervalue the company", not least because the fall in the dollar had pushed down the real value of the bid by 15 per cent.
Chloride is ABB's second target for the $7.1bn (£4.9bn) cash pile amassed at the end of its first quarter in March. Early last month, the Swiss company snapped up Ventyx, the US group which provides software to utilities and grid operators, for more than $1bn.
If yesterday's offer from ABB is approved by Chloride shareholders and the relevant regulators, the transaction will go through in the final quarter of the year.
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