Melrose could face rival bid from Cinven in battle to acquire Novar

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The Independent Online

The cash shell Melrose, which has tabled a £750m hostile takeover bid for Novar, could face a counter-bid from the private-equity firm Cinven, sources said.

The cash shell Melrose, which has tabled a £750m hostile takeover bid for Novar, could face a counter-bid from the private-equity firm Cinven, sources said.

Cinven is thought to be among six potential bidders for the manufacturing company, along with two other private equity firms and three industrial companies including General Electric and Siemens. They are thought to be interested in acquiring either parts of Novar or the entire company. Cinven's expression of interest is understood to be at a very early stage.

Novar rejected the original 145p-a-share cash and shares offer from Melrose, which valued the company at £625m, sparking what promises to be a lengthy and bitter bid battle.

Yesterday, Melrose posted its offer document to shareholders, saying its bid was now worth 172.5p-a-share at the current price of its shares, lifting the value of the offer to about £750m. However, Novar rejected the bid again, saying: "There is nothing new in the Melrose offer document. The Melrose proposal undervalues the group.... We continue to pursue a wide range of opportunities capable of delivering greater value to our shareholders than Melrose's offer." As part of its defence strategy, Novar is considering breaking up the company.

Melrose attacked Novar for its "poor historic financial and management performance," accusing its board of destroying shareholder value. In particular, Melrose attacked the recent appointment of Novar's chief executive, Stephen Howard, who had been a non-executive director for the past four years.

"For most of this time, Mr Howard was chief executive of Cookson Group where he presided over an even greater destruction of shareholder value than that seen at Novar," the Melrose directors said. Chris Miller, the chairman of Melrose, criticised Mr Howard's "sudden" appointment without proper consultation with shareholders, saying: "His record at Cookson speaks for itself. It doesn't look like he's the guy who's going to turn the business around."

In the offer document to shareholders, Mr Miller and David Roper, the chief executive of Melrose, contrasted their performance with that of the Novar management. They warned: "We do not believe that a hasty sale of underperforming businesses will match the value that could be created over time through our approach.... During our time at Wassall, we created nearly £500m of value for shareholders."

But a source close to Novar denied that any disposals would be fire sales, saying that such plans would not be motivated by a desire to frustrate the Melrose offer, but rather to do what is best for shareholders.

Melrose shares rose 2.5p to 130p yesterday. Novar shares fell 0.5p to 160p, giving the company a market value of £689m.

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