Shareholders spurn Invensys lifeline

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The Independent Online

Leading shareholders in Invensys would not be prepared to bail out the troubled engineering company if it turned to the stock market for cash, the Independent on Sunday has learnt.

The news is a major setback for the company that has issued three profits warnings this year, has announced 11,000 redundancies and last week said goodbye to its chief executive.

The FTSE 100 company owes over £3bn to the banks and its credit rating is in danger of being cut if it doesn't raise new cash.

Many analysts expect Invensys' new chief executive Rick Haythornthwaite to attempt a rights issue of between £500m and £1bn after he takes the company's helm on 1 October.

But leading investors said that they would be unwilling to support a foray into the equity market, fearing it would drive down Invensys' already battered share price and dilute their holdings.

One institutional investor said: "We would certainly not support a rights issue. Instead [Invensys] should sell assets, which would fetch a reasonable price." Some shareholders would like to see Invensys slimmed down to focus on just automation and controls, which presently generate 70 per cent of Invensys' revenues.

Allen Yurko last week quit as Invensys' chief executive, citing "the worst recession in US industrial production since the 1970s". But many in the City blamed Mr Yurko for a disastrous acquisition spree that included Baan, a near- bankrupt Dutch software company.

The City also directs some of the blame for Invensys' problems at finance director Kathleen O'Donovan. Last week the former BTR executive agreed to stay on at the companyto help Mr Hayth- ornthwaite. But some shareholders would like to see her replaced. "O'Donovan is just as much to blame for the mess as Yurko. She must go, too, when Haythornthwaite has got his feet under the table," said one investor.