McCarthy & Stone says founder's bid undervalues the company

McCarthy & Stone, the retirement home developer, yesterday said it had spurned a takeover bid from John McCarthy, its chairman and co-founder. It emerged earlier this month that Mr McCarthy had launched an attempt to buy back the company he began in 1963, with plans to merge the business with that of his sons. But the independent directors of McCarthy yesterday said Mr McCarthy had failed to put forward a high enough offer.

"We have concluded that the offer did not reflect the right value for the company," Keith Lovelock, the chief executive of the Bournemouth-based McCarthy, yesterday said. "We are a fast growing company that is doing very well and would be open to any serious bid that came forward, but it would have to be at a level in line with what the company is worth."

He said the approach had taken the whole company by surprise and the directors were now considering Mr McCarthy's position on the board. He is due to step down as non-executive chairman in December, having given up his executive powers two years ago. It is not yet known whether Mr McCarthy and his family, which own a 13 per cent stake in the company, will make a new approach for the group.

Both parties were yesterday keeping the price that was offered under wraps, but analysts expect the business not to sell out for less than £600m. Shares in the company yesterday closed down 3.37 per cent at 487p, valuing the business at £506m. "Mr McCarthy did make a very serious proposition to the board and he is disappointed that it has been rejected," a spokesman for PricewaterhouseCoopers, said yesterday. Mr McCarthy's sons, Spencer and Clinton McCarthy, set up a rival business, Churchill Retirement Living, in 1994 having served as carpenters' apprentices in their father's firm. The PwC team is understood to have been working on putting together an offer for some weeks and had secured financial backing for the family's bid.

Mr Lovelock yesterday refused to confirm whether any other approaches had been made to the firm, following speculation that a bidding war may be about to break out. It has an ever-growing number of potential customers as the UK population ages, and its niche position is seen as an attractive bolt-on acquisition opportunity for many house builders.

McCarthy, whose profits leapt by 80 per cent in the first half of the year, reassured its investors that business was booming in the retirement homes sector. Completions, exchanges and reservations of McCarthy properties have increased by 21 per cent in the past 10 months. The average price of a flat at the end of May had risen 19 per cent to £127,200 from the same time last year.

Mr Lovelock did warn, however, that the market may be less buoyant in July and August.