The board of Tomkins yesterday backed a £2.9bn takeover bid from a consortium of Canadian investors, putting management on collision course with at least one of its biggest shareholders.
Tomkins, the maker of car parts, bathtubs and whirlpool baths, doors and windows and other building components, said the bid from private equity firm Onex and the Canadian Pension Plan Investment Board, "fairly reflects both the value of the group today and its future potential".
However, Standard Life Investments, which holds about 3 per cent of Tomkins, said it would not support the 325p-a-share offer.
Tomkins said that some of its biggest investors, including Schroders and JP Morgan Asset Management, had backed the bid. The chairman David Newlands said he expected other investors to support the offer.
Standard Life's head of UK equities, David Cumming, said: "In contrast to comments from [Mr] Newlands, we do not expect the majority of Tomkins shareholders to support a deal whose valuation of the company is, without a shadow of a doubt, too low, and also provides massive incentives to the outgoing management team to deliver returns to private equity rather than to current shareholders."
Mr Newlands, a former director at Standard Life Investments, said that in his decade at the head of Tomkins it had received only one other bid, three years ago. "I have never believed that Tomkins would attract an industrial buyer. Of course, when private equity is involved there is always a suspicion among some investors that there was some more on the table, and for that reason I never expected unanimous support.
"I have complete respect for Standard Life's position, but I have to consider the other shareholders and having spoken to a number over the last week, there is support for this deal."
Both Schroders and JP Morgan have given irrevocable backing to the deal. Other investors will be asked to vote on the proposals in August.
Mr Cumming was also critical of financial settlement reached with members of the Tomkins management team. Under the deal, senior managers will be offered incentives by the new owners, including larger equity stakes and uncapped bonuses.
"We note the terms of the compensation arrangements that have been agreed between the senior executives and the consortium," he said. "Senior executives will effectively receive full value for outstanding Performance Share Plan awards and will benefit from substantially improved terms, relating to bonus payments and compensation payable on termination of employment with the new company."
A spokesman for Tomkins said that the group's independent directors were responsible for agreeing the takeover price.
A number of a UK groups have been snapped up in recent months, often by North American suitors, which are benefiting from a weak pound. Last month, Scott Wilson, a mid-tier engineer, toasted a 290p-a-share offer from its US peer URS – representing a 233 per cent premium to the group's value before it disclosed takeover talks were taking place – the second-highest premium paid for a UK company in the past 10 years. At the same time, Chloride, a FTSE-250 listed power company, said that it would accept a £997m offer from American rival Emerson Electric. Rumours of a deal, and other bids, helped to double the value of Chloride in just six months.
But Mark Wilson, an analyst at Collins Stewart said that there was unlikely to be a higher offer for Tomkins: "[The bid] doesn't reflect any kind of premium for fair value of the company. The only thing I think stopping it is some sort of counter bid and that looks very unlikely. And with the largest shareholder [Schroders] giving its backing, it's probably going to go through."Reuse content