Kidde accused of selling shareholders short in UTC deal

The fire protection group Kidde came under fire yesterday for selling itself too cheaply after it succumbed to a £1.44bn offer from the giant American conglomerate United Technologies.

The fire protection group Kidde came under fire yesterday for selling itself too cheaply after it succumbed to a £1.44bn offer from the giant American conglomerate United Technologies.

Kidde rejected a bid of 160p from UTC two months ago, saying it "materially undervalued" the group, but has now agreed to be bought for just 5p a share more plus a 2p special interim dividend.

Norman Askew, the chairman of Kidde, said the 165p offer represented a "fair price" compared with the 69.5p a share which the business was valued at when it was demerged from the rest of the former Williams Holdings group four years ago and UTC's 140p sighting shot in early summer.

But analysts said Kidde should have held out for a higher price. Michael Blogg of Arbuthnot described the offer as "disappointing", adding he was "dismayed by the volte-face" carried out by the Kidde board. "We regard 165p as insufficient to compensate for Kidde's excellent prospects," he said. Harry Philips of Williams de Broe also questioned the price, suggesting Kidde could have got another 5p a share out of UTC, whose chairman and chief executive is George David.

Kidde argued the further deterioration in the dollar since the initial takeover approach in late October had weakened its hand. The company said it had to bear in mind what UTC was prepared to pay and also the impact of the weaker dollar on its own profits, which are expected to take a £10m hit due to currency movements. About 50 per cent of Kidde's business is in the US.

Some analysts speculated that UTC's recommended offer could flush out rival bidders. Arbuthnot's Mr Blogg said Kidde was finally "in play" and cited Honeywell, General Electric and Siemens as potential suitors.

In an effort to shore up its position, UTC's brokers waded into the market yesterday and snapped up 7.5 per cent of Kidde, taking its total shareholding to 10 per cent. The offer represents a 34 premium to Kidde's price the day before UTC made its first formal offer in October. It also values the company at 18 times its 2004 earnings.

There is no poison pill or inducement fee to pay should Kidde pull out of the deal and the only shareholders who have given irrevocable undertakings to accept UTC's offer are the management. That leaves the door open to another bidder, but some observers questioned whether an auction would develop given that UTC made its first approach two months ago and that had not flushed out any other bidders.

Provided the deal with UTC goes through, it will see a large part of the old Williams empire reconstituted under American ownership. UTC already owns Chubb, the security business which was demerged at the same time as Kidde. The other main leg of Williams, the Yale locks division, was bought by the Swedes.

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