Enodis, the industrial oven manfacturer, shunned a £1.3bn merger approach from the maker of the Aga last night, arguing that the terms significantly undervalued the business.
Aga Food Service has made a nil-premium bid for its rival, offering to pay half in cash and half in shares. Aga's chief executive William McGrath said the two companies were "natural merger partners" because of Enodis's strength in the US market and Aga's European presence.
But Enodis, which has already turned away bid approaches from US rivals Middleby and Manitowoc this year, rejected the offer. It did allow Manitowoc to conduct due diligence after the Wisconsin-based company offered about £900m for the business before discussions were abandoned due to concerns over regulatory clearance in the US, where Enodis derives 75 per cent of its sales.
Enodis shares had jumped 7 per cent to 198.5p on speculation that an offer for the company had been lodged yesterday. Shortly after the market closed, Enodis confirmed that Aga had approached it in mid-October regarding a nil-premium all-share merger or alternatively an acquisition of Enodis for no premium split 50-50 between cash and shares.
Enodis said it had rejected the offer as it undervalued the business. It also said Aga's consumer appliances and retail operations would clash with its commercial food equipment business. David McCulloch, the chief executive of Enodis, said: "Enodis exited the consumer segment some time ago through the sale of Magnet and the cessation of Garland's high-end residential business. We therefore see no long-term benefit for our shareholders in a merger with Aga."
In contrast to Mr McGrath's comments, Mr McCulloch said: "Enodis and Aga are very different businesses."
Enodis manufactures ovens, refrigerators and fryers for fast-food restaurants such as McDonald's, Subway and Burger King. The company has benefited as its customers have refocused menus to include healthier options and have thus invested in new kitchen equipment.