Japanese make Pilkington approach

Shares in Pilkington, the world's second-biggest glass maker, surged yesterday after a rival Japanese producer made a takeover approach likely to value the St Helens-based company at about £2bn.

Nippon Sheet Glass, which is about half the size of Pilkington, said discussions were at a "very preliminary stage" and cautioned that there could be no assurance an offer would be made.

Pilkington shares rose by 21 per cent to close at 153.25p on news of the takeover approach. The company has been at the centre of bid speculation for several months, helping its share price to almost double in the past year. The company famously beat off a hostile bid from Sir Owen Green's conglomerate BTR two decades ago.

Despite its smaller size, NSG has featured prominently as a potential suitor because it already owns a 20 per cent stake in Pilkington. The shareholding was built up as a result of an asset swap five years ago, which involved NSG taking an initial 10 per cent of Pilkington in return for the UK company taking over NSG's stake in an American glass maker.

The Pilkington board is expected to discuss the Japanese approach tomorrow when it meets to sign off the company's first-half figures, which will show a 20 per cent increase in profits compared with the same period last year.

If a formal bid is tabled, it will almost certainly have to be on an agreed basis because it would in effect amount to a reverse takeover of Pilkington, given the disparity in size of the two companies.

Pilkington, which invented float glass manufacturing in the 1950s and has made a fresh technological breakthrough more recently with self-cleaning glass, controls about 15 per cent of the world market, putting it in second place behind the global leader Asahi Glass, also of Japan.

Pilkington's sales are split evenly between the building and automotive industries, where its customers include Aston Martin, Volkswagen and Toyota. Its markets are Europe and North America, although it also has a presence in China, Brazil, Argentina and Australia.

NSG ranks outside the world's top five and because it is largely based in Japan, industry observers do not expect there to be any regulatory obstacles to it buying Pilkington.

Saint-Gobain, the French building materials giant which is currently pursuing a hostile bid for the British plasterboard manufacturer BPB, has also been rumoured as a potential bidder for Pilkington.

But analysts believe an approach by Saint-Gobain would almost certainly be vetoed on competition grounds since it would bring Europe's two biggest glass makers together.

A spokesman for the French company, which ranks fourth in global terms, acknowledged this yesterday, saying European anti-trust laws might make a bid for Pilkington an "impossible transaction".

Pilkington has cut its workforce by a third to 24,000 since the late 1990s and under its chief executive Stuart Chambers, who took over in 2002, it has continued to restructure, reducing its debts by a third to £572m.

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