Invensys considers break-up

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The Independent Online

Invensys, the engineering group, yesterday said that it was considering a break-up of the company, following last month's catastrophic profits warning.

Invensys, the engineering group, yesterday said that it was considering a break-up of the company, following last month's catastrophic profits warning.

The company also moved to dismiss recent fevered speculation that it had attracted bid interest. It said that it is not "currently" in talks with any third party, though analysts said that left open the possibility that it had recently held unsuccessful discussions with a potential bidder.

Invensys shares closed up 1.75p at 162.5p yesterday, having lurched 8 per cent lower in the morning, as 92.5 million shares changed hands.

It said: "The company continues to consider options to enhance shareholder value."

Industry sources said that this review included the possibility that it would spin off its fastest growing business, the power systems division.

The City has put a value of up to £4bn on the power interests. At yesterday's close, the whole group was valued at £5.7bn. It is thought the power business, which "cleans" the power supply to electronic equipment, could be floated on Nasdaq. The move would leave Invensys focused on automation systems, controls and software.

Adrian Murray, an analyst at Teather & Greenwood, said: "The chances are that there's going to be some sort of corporate action. A break-up is most likely to take the form of power systems being spun off."

On 7 September, Allen Yurko, the habitually bullish chief executive of Invensys, shocked the City with a warning that first-half profits would be down on last year. The company blamed sluggish demand in two key markets, the oil sector and the US new homes market.

The news wiped more than £3bn off the value of Invensys and it has been seen as a bid target ever since. Companies thought of as possible acquirers include Tyco, the US conglomerate and Siemens, the German group. However, the £474m acquisition by Invensys, over the summer, of Baan, the bankrupt Dutch software business, is seen as a possible "poison pill". Analysts said that potential bidders would be put off by uncertainty about how great the problems are at Baan.

In the absence of a bid, a break-up is seen as a likely response from Invensys to its dramatic fall from favour.

Investors yesterday said they would have to wait for the company's interim results, due in the second half of November, before the scale of the problems at Invensys became clear.

One leading shareholder said: "We're in the dark at the moment. I can only make a proper assessment after the results. I have no problem with a spin-off, if it's done for the right reasons"

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