Pilkington turns down third bid from Japanese

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The Independent Online

The glass maker Pilkington rejected yesterday a third takeover approach worth £2.07bn from Japan's Nippon Sheet Glass, saying the price "fell short" of the level the board could accept.

Shares in Pilkington, the world's second-biggest glass maker, fell 5.25p to 144.5p, suggesting investors did not believe the Japanese company could increase its 158p-per-share approach.

Nippon Sheet Glass, which owns 20 per cent of its target, has yet to line up financing for any bid, sparking scepticism that it could afford to raise its offer. The company started courting Pilkington with a 150p-per-share offer last month, before verbally increasing the approach to 155p. Its third approach was laced with pre-conditions, including coming up with the cash.

Analysts at Dresdner Kleinwort Wasserstein believe Pilkington's board should hold out for up to 180p per share. "Our gut feeling is Nippon sounds financially constrained, which could explain why they have increased their bid by only 8p," they wrote in a note to investors.

Rejecting the bid gives Sir Nigel Rudd, Pilkington's chairman, one less takeover to worry about. He also chairs Boots, the chemist seeking a tie-up with Alliance UniChem, and Pendragon, the car dealership looking to buy Reg Vardy.

In a statement, Pilkington's board said it had informed its biggest shareholder that the pre-conditions are "unacceptable and the price still falls short of a level which it would be prepared to recommend". At 150p per share, the board said the offer "fell materially short" of an acceptable level.

Nippon is thought unlikely to launch a hostile bid for Pilkington, which is twice its size, since it would need to rely on the goodwill and support of its target's well-regarded management to make any deal a success. With no counter bidder in sight, analysts believe Pilkington shares will fall sharply if Nippon walks away.

Stuart Chambers, Pilkington's chief executive, has said he is keen to concentrate on the third leg of the group's three-pronged recovery 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.