The status of a £2bn takeover bid for Pilkington was plunged into confusion yesterday after the UK glass maker declined to comment on reports it was preparing to pull the plug on the nine-week old talks.
The company was said to be preparing a statement to the stock market saying that takeover talks with Nippon Sheet Glass of Japan had failed. The report is likely to trigger a sell-off in its shares today, which had surged 28 per cent to 155p after Nippon made its first offer in October. Its shares dropped 3.5p, or 2.28 per cent, to 150.25p on Friday as rumours began to circulate. Analysts fear the price could fall back to 140p.
Nippon made its opening offer of 150p a share at £1.97bn in October. Pilkington rejected this as undervaluing the company. Nippon came back with an oral approach of 155p and a written offer of 158p, valuing its Merseyside-based target at £2.08bn. The final offer, which was also rebuffed, included conditions that Pilkington restructure its balance sheet. It is understood talks collapsed over that demand and over Nippon's refusal to go above 158p.
A spokesman for Pilkington declined to respond to the report, while Nippon could not be reached for comment. However, The Sunday Telegraph quoted a source close to the negotiations as saying: "The advice from the bankers is that this deal isn't going to happen."
The report said Sir Nigel Rudd, its chairman, had been advised the company should make a statement within 10 days. But Pilkington might be forced to make a statement sooner than that if the share price suffers a significant fall this week.
Nippon owns almost one-fifth of Pilkington, which would make a rival bid unlikely. Analysts had said a merger would generate savings by combining Nippon's UK subsidiary NGF Europe with the headquarters of Pilkington as they are both in St Helens, near Liverpool.
Nippon is Japan's No 2 supplier of glass to the automotive market, while Pilkington has carved out strong positions in North America and Europe.
Stuart Chambers, Pilkington's chief executive, has said he is keen to concentrate on his strategy to begin investing for profitable growth. The company has a war chest of £200m to spend in the next three years, expanding into the developing regions of Russia, China, India and the Middle East.
In the past three years, Pilkington has slashed its debts and its workforce by one-third. Its borrowings stand at £685m, meaning it is generating sufficient free cash after interest payments to spend about £80m a year growing the business.
Shares in Pilkington have more than doubled over the past two years on takeover speculation and an improving operational performance, which was underlined in November by a 22 per cent rise in first-half profits, to £99m, despite rising energy costs.Reuse content