Outlook: BTR/Siebe

NOBODY SEEMS much to like Siebe's planned merger with BTR. Siebe's shareholders worry that the merger will dilute their company's quality image, and that BTR will prove as unmanageable for Siebe's Allen Yurko as it plainly has been for his opposite number at BTR, Ian Strachen.

Meanwhile BTR shareholders complain that the takeover - for that is what it is in essence - is without premium and does nothing to correct the appalling loss of value they've experienced. Furthermore, they seem to be contributing rather more than half the combined turnover and profits for rather less than half its shares. They question whether the injection of Siebe's management is worth that kind of dilution.

BTR's share price has been in more or less relentless decline ever since Ian Strachen was appointed with the brief of dismantling the sprawling industrial conglomerate created by Sir Owen Green and transforming it into a "focused engineering group". Nobody can fault the underlying sense of this; the problem is that once committed to a programme of wholesale asset sales, it is the saleable bits that tend to go first, leaving the dross behind. There is certainly a suspicion that this is what has happened at BTR and that this is one of the reasons its profits are in such precipitous decline.

All the same, hope springs eternal and many BTR shareholders continue to believe there's recovery value in the rump. Plainly Mr Yurko is not going to agree a renegotiation of the terms; he's got enough explaining to do to his own shareholders as it is. So BTR's only hope is that the Siebe deal will shake someone else out of the tree.

With the shares now trading at a 7 per cent premium to the value of Siebe's offer, the market is saying that this is not altogether impossible. A year ago, if anyone had come shopping with an offer of, say, 160p a share cash, he would have been sent away with a flea in his ear. Today shareholders would bite his hand off in their desperation to accept the offer.

There are at least four US engineering companies for whom BTR would make a good fit, though some of these might have a competition problem in bidding. Alternatively, one of Britain's smaller engineering companies might like to chance their arm with a management buyin. Both possibilities seem remote, but there's still a chance someone's going to spoil the party.

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