Novar chief pockets £810,000 bonus in US takeover deal

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The Independent Online

The chief executive of Novar, the building supplies, fire protection and cheque printing group, is to walk away with an £810,000 bonus for five weeks' work after the company accepted a £798m break-up bid yesterday from Honeywell of the US.

Stephen Howard, who took the helm on 4 November, is entitled to a success fee equivalent to 1.25 times his £650,000 salary for pulling off the deal which trumps an earlier hostile bid from Melrose.

Analysts said the 185p-a-share offer was likely to prove a knockout price. Together with a 6.6p final dividend which Honeywell will pay Novar shareholders and the cost of taking on its £300m in debt and buying out preference shareholders, the deal is valued at £1.2bn.

Melrose, a buyout vehicle put together with the backing of a number of big institutional shareholders and led by a former Hanson executive, had bid 173p in a mixture of cash and shares. After the Novar board's decision to recommend the Honeywell offer, Melrose said it was reviewing its options. But an increased bid is thought unlikely unless its institutional backers show appetite to provide more funding.

Honeywell said it intended to keep only Novar's fire alarms, lighting systems and CCTV division and dispose of the other two, which specialise in aluminium extrusions and cheque printing. The US company said it expected the sale of these two divisions to raise $1bn (£520m) to $1.5bn.

Mr Howard defended the bonus he is set to collect on the grounds that the value of the company had increased by £300m since his appointment. Mr Howard was made chief executive on the same day that Melrose announced its intention to bid. Honeywell's offer represents a 49 per cent premium to the Novar share price the previous day.

He said Novar had already been looking at strategic options for the group, including a break-up, when Melrose declared its bid intentions. "We were going to move ahead regardless of what Melrose did," Mr Howard added.

Novar's biggest shareholder, Active Value, has given irrevocable undertakings to accept the Honeywell offer unless a competing bid worth at least 10 per cent more is made. There is a £6m break fee if Novar sells out to another bidder.

David Anderson, Honeywell's finance director, said there would be job losses as a result of combining Novar's remaining business with its own automation and control systems division but he declined to say how many.

Mr Anderson estimated that the deal would generate $100m of additional profits a year and said he did not expect any regulatory opposition because the products and markets that the two companies operated in were largely complementary.