Stewart to take £1.4bn bid for Close Bros to investors

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The Independent Online

Andy Stewart, the chief executive of Cenkos, said that his audacious £1.4bn break-up bid for Close Brothers was "not dead in the water" despite the target rejecting the offer outright and refusing an invitation to begin merger talks.

Close Brothers acknowledged in a statement to the stock exchange yesterday receipt of the 950p-per-share offer, tabled by Cenkos and Landsbanki of Iceland, but dismissed it as "wholly inadequate". It added: "The board does not propose to pursue discussions with the consortium."

Mr Stewart said, however, that he would seek to win-over the company's investors. "It's not dead in the water. I will be interested to know what their shareholders think," he said.

"The fact that they dismiss it out of hand and don't want to meet the company that is offering £9.50 per share for the business is curious. The directors don't own much equity, but they are the ones saying 'No thank you' after their stock price has gone up to £9.20. Recently it was £7.50. If Cenkos refused to meet people who had made an offer, I don't think my shareholders would appreciate that."

Mr Stewart added that he had already lined up financing for the bid. Under the proposal, Cenkos, the securities firm he started two years ago, would absorb Close Brothers' securities, corporate finance division and asset management businesses, while Landsbanki would take over the banking unit.

If successful, Mr Stewart said he would rejig the compensation structure at Close Brothers. "The business, if properly incentivised, is very valuable. What percentage in either Close Brothers or its subsidiaries do the workers own? Not a lot," he said. "One of the rules at Cenkos is that everybody owns shares. I think it's quite amazing they don't want to talk to us."

Despite the unequivocal rejection by Close Brothers, investors were nonetheless cheered by the prospect that the company could now be in play. Its shares soared to end the day up 21 per cent at 916p. The share price of Close Brothers has suffered amid the credit crunch this year, having lost a quarter of its value before yesterday's spike.

The group is known for its disparate structure in which each of its main divisions operates relatively independent of the others. Analysts have cited the company's struggling stock price as being, in part, due to this "conglomerate discount." For bidders, this would arguably leave room to wring out synergies.

While the 950p offer represents a nearly 30 per cent premium over Close Brothers' share price close the previous day, its equal to just a 6 per cent premium on its average over the preceding year, and 15 per cent over the average price in the last six months.

Robin Savage, an analyst at KBC Peel Hunt, said a takeover could make sense. "We see value in Close Brothers, particularly following the current credit crunch. It is well capitalised, has well-diversified sources of funding and an exceptional collection of asset management, corporate finance, securities trading and banking businesses."

Mr Stewart founded Cenkos two years ago after leaving Collins Stewart. Cenkos is worth less than one tenth that of Close Brothers.

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