Kidde board rejects £1.3bn takeover, so UTC may go hostile

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The Independent Online

United Technologies Corp (UTC) of the United States revealed yesterday that it had made an offer of about £1.3bn for Kidde, the fire prevention and protection group and that it might now launch a hostile bid.

United Technologies Corp (UTC) of the United States revealed yesterday that it had made an offer of about £1.3bn for Kidde, the fire prevention and protection group and that it might now launch a hostile bid.

The British company was forced to make a statement after a sharp increase in its share price spurred by rumours of the approach. It said: "The board of Kidde announces that it recently received a preliminary approach from a third party in relation to a potential offer for the entire issued share capital of Kidde. However, the board has rejected the proposal made and no further proposal has been received."

UTC later revealed that it would meet shareholders to persuade them to press the board into allowing it access to the UK group's books in order to carry out due diligence. It did not rule out the possibility of a hostile takeover bid.

Kidde shares closed up 17 per cent at 145p and UTC's potential offer represents a significant premium to Kidde's share price ahead of the frenzied speculation. UTC said that it felt an offer of 160p a share represented a full price for the company, representing 14 times earning before interest and appreciation.

Kidde shares have more than doubled since the company was demerged from the former Williams conglomerate in late 2000. The other company spun off from Williams at the same time was Chubb, a security services business, which has already been bought by UTC.

Michael Blogg, an analyst at Arbuthnot Securities, said that separating Kidde and Chubb had been a mistake, leaving both businesses with gaps in product lines and distribution. "It would be very interesting if this approach came from UTC. The industrial logic of splitting these companies [Kidde and Chubb] simply did not exist."

If UTC did buy Kidde, it would effectively be putting the businesses back together. Mr Blogg said a successful approach may have to value Kidde as high as 200p a share or nearly £1.7bn. Others said that it did not matter who the initial approach came from as Kidde was now in play and a number of other suitors were likely to emerge. The US groups Tyco and Honeywell were mentioned as possible bidders.

Harry Philips, an analyst at Williams de Broë, said: "If it [the approach] had been at 200p they'd have to have put it to shareholders.... This is a cracking business with a lot of momentum behind."

The aerospace market has shown signs of recovery for Kidde, while its residential arm is performing strongly. New legislation, especially in the US, drives demand for fire prevention and detection equipment.

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