Emerson Electric increased its cash bid for the UK power supply group Chloride by about a third yesterday to $1.5bn (£996m), trumping a rival bid from the Swiss engineer ABB by $250m.
Chloride last night declared the improved 375p-a-share offer from its US rival "a superior proposal" to the 325p cash bid from ABB that the UK group's board has recommended to investors.
This triggers a clause in the agreement between the UK and Swiss groups that gives ABB two days to tell Chloride whether it intends to come back with an alternative offer, and a further 48 hours to formalise a bid.
Shares in Chloride yesterday soared 11 per cent, or 38.6p, to 387p as investors bet on an ABB counterbid.
Emerson, Chloride's American rival, is desperate to prevent the Swiss engineer ABB from getting a foothold in the power supply market. ABB unveiled its agreed deal with Chloride earlier this month after the UK group rejected an initial approach from Emerson in April. Another offer by the US firm was also rebuffed by Chloride two years ago.
David Stormont of Hermes Investment Management, which owns about 1 per cent of Chloride's shares, said that Emerson was now paying the price for its earlier "low-ball" offer. "Emerson is facing the prospect of a very powerful group, ABB, coming into one of its core markets and it will pay up to avoid that," he added.
Under ABB's recommended proposal, Chloride shareholders will get 325p a share, while the Swiss group will also honour a 3.3p final dividend, taking the overall offer to 328.3p. That offer was trumped yesterday by Emerson's 375p a share proposal. In April, Emerson offered just 275p.
ABB believes its services would complement Chloride's position in the uninterrupted power supply and critical power sectors. As well as the matching clause agreement ABB has with Chloride, there is also a break fee deal that would see Chloride pay the Swiss group £8.5m should Chloride's board decide to switch its recommendation to Emerson.
"Emerson has finally shown overdue decisiveness," said Michael Blogg, an analyst at Arbuthnot yesterday. "In view of Chloride's quality and prospects it is heartening to see a proper auction developing and there is still an outside chance of an increased offer from ABB."
Scott Cagehin, an analyst at Numis, said that the Emerson bid represents fair value for Chloride, but that shareholders could still expect ABB to make a new offer. "This appears to be a fully valued deal but we await a response from ABB [which] may clearly return with an increased offer. We would expect any counter offer to start at 385p," he said. "ABB is in a strong position to respond having carried out its due diligence and is armed with a large net cash balance sheet."
Some shareholders in Chloride were yesterday hoping the bid from ABB would go higher. One of them said there was a "reasonable chance" ABB would respond, but added that shareholders were now looking for 400p a share.
All eyes on URS as rivals close in on Scott Wilson takeover
URS, one of two US engineering companies battling to buy their British peer, Scott Wilson, said yesterday that it was considering raising its offer of 210p per share after being trumped by a higher bid from CHM Hill of 245p a share.
The announcement came a day after URS had its original offer recommended to shareholders by Scott Wilson's board. It was also given the right to match a rival bid. URS was outmanoeuvred on Monday afternoon, however, when CHM bought 12.97 per cent of Scott Wilson at 245p a share before launching a formal takeover bid. Yesterday, Scott Wilson refused to say whether it was still recommending the URS offer. Martin Koffel, the chairman and chief executive of URS, was unavailable for comment.
Scott Wilson's shares jumped by 111 per cent on Monday following URS's bid and CHM's share purchase. URS has until 5pm today to exercise its right to match CRM's offer.
Tomorrow, the Scott Wilson board will discuss each proposal. If URS is willing to match the CRM offer, it will must formalise its new bid by the end of the week.Reuse content