Rebuff by Hillsdown fails to deter Unigate

DAIRY group Unigate yesterday made clear it was still interested in taking over Hillsdown Holdings despite calling off earlier talks with the food-to-housebuilding company.

Unigate shares slumped 17p to 668p after it released a formal statement saying it was "continuing to evaluate its interest in Hillsdown".

The move increased speculation that cash-rich Unigate was preparing to launch a formal pounds 1.5bn bid. It is aware that Northern Foods and Geest are seen as potential suitors for Hillsdown, whose shares rose 3.5p to 189p yesterday.

Unigate, which had an earlier proposed cash and equity offer worth 207p per share rejected by the Hillsdown board at the start of the year, said its primary interest was in Hillsdown's food businesses. These assets would enable Unigate to "offer significant scope for enhancing operating and financial performance".

Hillsdown's food businesses would strengthen Unigate's position as a leading supplier of branded and own-label products to UK food retailers, allow it to enhance its Malton fresh food business by bringing in poultry, and allow expansion in chilled prepared foods. Unigate is also interested in Hillsdown's infrastructure on the Continent which would help its development as a supplier to European retailers.

Earlier this month Hillsdown unveiled a three-way plan to spin off its chilled foods business and housing arm, Fairview. The furniture business would also be sold, transforming the group into a focused grocery store and allowing cash to be returned to shareholders.

Analysts say the furniture business alone could realise more than pounds 250m. A similar figure could be raised from the sale of other businesses.

Fairview, which focuses on low- to medium-cost houses in the South-east of England, saw sales of pounds 163.2m last year. Chilled foods saw pro-forma sales of nearly pounds 430m.

If Unigate makes a formal bid for the whole of Hillsdown and wins, some major asset sales almost certainly follow.