Siebe seals pounds 511m Unitech takeover

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The Independent Online
Siebe yesterday sealed agreement with rival engineering group Unitech for a pounds 511m takeover. The two sides have been talking since Siebe announced last month it had bought a 25 per cent stake in Unitech from Electrowatt of Switzerland and had an option over the Swiss group's remaining 4.1 per cent holding.

The main offer is 0.804 Siebe shares for every one in Unitech, with a full cash alternative worth 659p a share. Siebe's shares fell 23p to 874p, putting a value just short of 703p on the paper offer. Unitech rose 29p to 703p.

Electrowatt has committed itself to accepting the offer for its remaining holding in Unitech and Siebe has also received acceptances from directors controlling a further 1.2 per cent, giving Siebe control over 30.3 per cent.

Siebe has had to pay significantly more than the 590p a share which it paid for its initial stake, but Allen Yurko, chief executive, dismissed suggestions that they had been forced to overpay to secure board agreement. "Certainly board agreement was significant and important to us. We wanted a growth company, management agreement and to bring on board [Unitech's Japanese subsidiary] without hostility."

But he described the 670p average price for the bid as "very fair". Siebe hopes to retain all the executive members of the Unitech board, led by Peter Curry, chairman and chief executive, and has no present plans to close either the company's Reading headquarters or any of its plants.

The acquisition would not dilute earnings in the first year and would enhance them in following years, Mr Yurko claimed. It would strengthen Siebe's existing business in three strategic areas.

Unitech was a leader in electronic power controls, used inside electrical equipment as sophisticated current transformers. It was "the final peg in the final hole" in the group's existing electronic controls business, where they would now be in all the main markets of the world, he said. Unitech would take the 2 per cent world market share of Siebe's existing Teccor business to around 10 per cent.

Meanwhile, he described Nemic-Lambda, 50.6 per cent controlled by Unitech, as "a brilliant company". Siebe had been looking for years at ways to penetrate the Far Eastern market and this was a backdoor way of doing an acquisition there, he said. "It would have taken five to six years to have built this sort of presence."

Finally, Unitech's heating, ventilating and air conditioning operation was entirely complementary with Siebe's own business in this area. It would reinforce the group's leadership in this market, adding around 3 points to its market share to between 18 and 19 per cent.

Analysts were less enthusiastic about the bid. Sandy Morris of NatWest Markets said: "I can understand where [Unitech] fits in. Their product is an adjunct to everything else [Siebe] does. This allows them to offer a complete electronic controls system." But he questioned the claim that the acquisition would not be dilutive, saying he would have to raise his forecast for Unitech for the 1997-98 year, the first full 12 months with the group, from pounds 64m to pounds 72m, to make the numbers stack up.