Morgan Crucible shares rise as suitor circles

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The Independent Online

The engineering group Morgan Crucible, which supplies ceramics used in the manufacture of steel, revealed yesterday that it has received a takeover approach.

A short statement, made to the London Stock Exchange minutes before trading halted for the day, described that approach as "preliminary" and stressed that no formal offer for the company may be forthcoming. A further announcement would be made in due course, Windsor-based Morgan Crucible said.

Confirmation of interest from a potential predator spurred Morgan Crucible shares 48.5p higher to a five-year high of 282p. More than eight times the usual number was traded.

Yesterday's share-price rise, easily the biggest by any constituent of the FTSE 250 index, valued the company at £827.4m.

Neither the name of the possible buyer nor any suggested price was given.

However, there was earlier speculation that a private equity bidder may be prepared to pay as much as 350p a share, or more than £1bn, for the company.

Last week, Morgan Crucible revealed that profits before tax doubled to £30.1m in the six months to 4 July. They were bolstered by job cuts, the re-location of production to countries where wages are cheaper and by higher demand for body armour from British and American armed forces.

The company, which was founded in 1856, is nearing the end of a three-year restructuring plan orchestrated by Warren Knowlton, who stepped down as chief executive on Friday. He was succeeded by Mark Robertshaw, the group's former finance director.

Potential buyers are likely to be attracted to the company's healthy cash generation and its solid position in key markets.

Morgan Crucible expanded too quickly during the 1990s and was hard hit by a downturn in the global economy in 2001. The value of the shares sank to a nadir of 26p March 2003.

Its recovery over the past three years has been marked. At the outset of 2003, the company looked to be going to the wall. It was suffering heavy losses and struggling under onerous debts. With a pension fund deficit standing at three times the company's market value, its bankers were threatening to pull the plug.

Its renaissance since then has been founded on a series of disposals, including a sale of its magnetics division for £300m in October last year.

The disposal programme not only cut debt but also focussed the company on its core business: the provision of ceramics and carbon products to the aerospace, medical, railway and medical industries.

In February, Morgan Crucible unveiled healthy improvements in sales across all three key divisions: insulating ceramics; carbon; and technical ceramics. A 3 per cent jump in annual profits was accompanied by plans for its first dividend in five years.