Invensys stays silent as shares soar amid bid rumours

Company refuses to issue statement after reports of possible US takeover
  • @ArmitageJim

Invensys, the historic engineering group, last night controversially refused to issue a statement to the Stock Exchange despite a 27 per cent share price rise following reports that the £2bn company could be taken over by Emerson Electric of the US.

Invensys was created from the merger of BTR, which once owned Dunlop, and the engineering group Siebe. Its shares shot up after reports that Emerson was looking at buying all or some of the company. The rise added nearly £440m to Invensys' stock market value.

The Bloomberg news agency, citing multiple sources, said Emerson had expressed an interest in buying its Foxboro unit, which makes meters and control systems. While it does not want the rail division, it is so keen on Foxboro that it would buy the whole company in order to get it, they said.

Takeover talk has swirled around Invensys for weeks, although none has created such a furore in the share price as yesterday's. But despite the usual practice of releasing a statement noting a share price movement of such magnitude – the shares rose 54p to 257p – a spokesman merely said: "We never comment on speculation."

Takeover Panel rules state that companies must make an announcement if there is a large move in a company's share price when a potential bidder first actively considers an offer, even if it has not yet made a formal approach.

Some analysts remained sceptical about whether a deal could be achieved because of the disastrous shape of Invensys' UK pension fund. It is running a deficit of £426m. "A deal is hard to do because a large part of any money they get for the business is going to go straight to the pension fund and not the shareholders," said one analyst.

However, others pointed out that Invensys is chaired by the veteran dealmaker Sir Nigel Rudd, who has a reputation for selling companies including Boots and Pilkington.

Coincidentally, Invensys' predecessor, BTR, launched a bitter hostile takeover battle for Pilkington in 1985 but was eventually forced to pull its campaign.

"If anyone can get a deal done, it's that man Mr Rudd," said one engineering sector analyst.

If Invensys did get taken over by the Americans, it would give rise to yet more criticism of the way historic British companies are being sold abroad.

Invensys advisers have been talking to several other potential buyers – all from abroad. Siemens, GE, Eaton and ABB have been named in speculation.

Despite its rich heritage in the world of engineering, the company has run into huge crises in the past. During the early 2000s, Invensys underwent a restructuring after falling sales and large debts pushed it close to bankruptcy. A £2.7bn debt restructuring in 2004 rescued the business.

One botched deal saw it buy the software business Baan Corporation for $708m (£451m) in 2000 only to sell it three years later for just $135m.

More recent times have seen Mr Rudd replace chief executive Ulf Henriksson with Wayne Edmunds after an alleged disagreement over strategy, while the company has seen its shares tumble since 2010, partly due to delays producing control and safety systems for Chinese nuclear reactors.

Last year it attempted to deal with its pension crisis, hiring a Goldman Sachs division called Rothesay Life to manage it and tried to find a way to separate the fund's liabilities from the company.

Invensys takeover speculation has gathered pace partly because of last month's takeover by Eaton Corp of the US of fellow engineer Cooper Industries for $11.8bn.