Melrose attacks Novar's break-up defence

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The Independent Online

Sir Graham Hearne and Stephen Howard, respectively the chairman and chief executive of Novar, were accused yesterday of "busting the company up" by Melrose, the specialist takeover vehicle which launched a formal £625m bid for the mini-conglomerate.

Melrose's 145p-a-share cash and shares offer was immediately rejected by Novar, sparking what promises to be a lengthy and bitter bid battle.

Novar, advised by Cazenove and CSFB, said the offer undervalued the group and its prospects. A spokesman poured scorn on the 17 per cent premium that the Melrose offer represents to Novar's closing price last Wednesday, the day before Melrose first declared its interest in bidding. "Whatever they [the shareholders] do, they are not going to take 20 per cent," he said.

Novar issued a statement on Wednesday saying it had received several approaches from third parties interested in buying its operations which include cheque printing, aluminium extrusion and heating control systems for the building industry. It said it was exploring these opportunities as a way of enhancing shareholder value.

David Roper, the chief executive of Melrose, said: "Novar said our offer was 'unappealing'. That is quite an interesting thing to say. Normally the expression on defences is that an offer is 'unacceptable and opportunistic'. If their bid defence is to bust the group up in 12 months' time I would say their bid defence is what's unacceptable and opportunistic.

"We want to run this business over a longer period of time to extract even greater value. This strategy they've come up with in the last week. They have been under pressure from shareholders to do something to realise value but have done nothing. We appear on the horizon and, hey presto, they are busting the company up," he said.

The Novar spokesman said: "I think what the shareholders would like is cash back to them, not give some away to another management team. When Graham announced Stephen's appointment he said he would be an agent of change."

Melrose has offered Novar shareholders 45p in cash plus one Melrose share valued at 100p. To fund the cash element, Melrose announced it had successfully arranged an underwritten cash placing with institutions worth £232m. It has an agreement to refinance Novar's existing debt.

A key player in what happens to Novar will be Active Value, the fund manager which holds about 17 per cent of the company's shares. Its funds, mainly from the US pension fund Calpers and the Ontario teachers' pension fund, are in liquidation mode since selling out of Wembley in March. Julian Treger, a founder of Active Value, said he "welcomed" the Melrose bid but gave no indication whether he would accept it.