Talk of pounds 1.3bn bid by Williams key to leap in Chubb shares

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The Independent Online
Williams Holdings was last night tipped to launch a pounds 1.3bn recommended offer for locks and alarms group Chubb today, five years after it made an unsuccessful pounds 700m bid for the company's former parent Racal. Expectations of a bid from the conglomerate, whose own security arm owns the Yale brand, sent Chubb's shares soaring. Chubb provoked intense speculation yesterday when it issued a statement saying it was in talks that might lead to an offer being made for the company at up to 450p a share but refused to name the bidder. In the market the shares closed 79p higher at 420p, their highest level for three years.

Analysts said a bid for the company was not unexpected following disappointing recent results and speculation immediately focused on a handful of potential buyers including Rentokil Initial, Ingersoll-Rand, Tyco and Republic Industries. After strong profits growth following Chubb's demerger from Racal in 1991, the company had recently failed to live up to earlier expectations.

One analyst said the sale was another example of chairman Sir Ernest Harrison's focus on creating shareholder value. Following the successful demerger of Vodafone in the late 1980s from Racal, Sir Ernest had spun off Chubb and installed David Peacock as chief executive with a remit to cut costs. Now that process was largely complete, a disposal of the company was the logical next step, the analyst added.

Chubb, with sales of about pounds 1bn, has an attractive share of the estimated pounds 25bn world-wide market for electronic and physical security. It has faced difficulties, however, in moving from the relatively low-growth markets of the developed economies to regions with more exciting growth prospects such as China, where the security business is starting more or less from scratch.

Williams has interests in the Far East with its security and fire prevention operations, the two legs of its business it plans to grow at the expense of its low-growth building materials division, the UK part of which it recently sold for pounds 303m.

Although analysts thought a bid from Williams would make strong commercial sense, some questioned whether it would want to make such a large acquisition after recent comments suggesting it planned to spend about pounds 500m on infill purchases. Williams has also indicated it would not issue further new shares to finance its ongoing expansion.

Buying Chubb now, however, was viewed as an opportunistic time to make a bid for a company which will not see the benefit of recent acquisitions for up to two years.