Melrose, the industrial buyout vehicle which snapped up the engineering group FKI in 2008, has turned its sights on Charter International, the troubled tool and equipment firm whose chief executive resigned on the heels of a profit warning earlier this month.
The preliminary approach, which is pitched at 780p per share, values Charter at £1.3bn and offers shareholders a 30 per cent premium to the manufacturing group's closing price on Monday, the day Charter announced the resignation of its chief executive, Michael Foster. Melrose made the approach on Tuesday.
Mr Foster's departure came a week after Charter saw its shares slump 25 per cent following a warning that its results were likely to miss expectations owing to the "increasingly challenging trading environment" faced by its core ESAB welding tools unit. Its shares were trading above 800p at the start of May.
Yesterday, Charter confirmed receipt of the "highly preliminary, conditional and opportunistic" proposal and said its "board will meet to consider this approach and a further announcement will be made in due course". But in a sign that the company was in no hurry to sell, a Charter spokesman said: "Melrose may want to buy on the cheap – it doesn't mean Charter shareholders have to sell on the cheap."
Melrose, whose shareholder register overlaps with around 30 per cent of Charter's, said that if it did make a firm offer, the bid would consist of a mix of cash and shares, much like the FKI bid. The group is expected to ask Charter's chairman, Lars Emilson – who assumed Mr Foster's responsibilities following his resignation earlier this week – to allow for due diligence by opening up the company's books.
The stock market reaction – with traders driving up the Charter International share price to 787p, comfortably above Melrose's possible offer price of 780p – indicated the possibility of a counter bid, with Lincoln Electric, which tried to acquire Charter back in 2000, being cited as a potential suitor. The blue-chip engineer Weir was also mooted as a possible bidder.Reuse content