Tapie furious as Pentland calls off 215m pounds deal to buy Adidas

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The Independent Online
HARSH words were exchanged yesterday as Pentland of the UK unexpectedly scrapped a pounds 215m deal to buy Adidas, the German sports goods company, from Bernard Tapie, the French businessman.

The leisure investment group's shares suffered from yesterday's events, initially losing 13p to 129p on the announcement before closing at 132p.

Pentland, which originally bought a 20 per cent stake in Adidas last year for pounds 46m, made a pounds 215m offer for the outstanding shares in July. The deal was due to be completed next month.

However, due diligence carried out on Adidas revealed 'some serious items', said Frank Farrant, finance director of Pentland. He could not elaborate because of confidentiality agreements. He did say, though, that Pentland had tried to renegotiate the deal after 'unearthing things we were not quite expecting. We would not walk away from this deal lightly'.

Mr Tapie's reaction to the news was scathing. 'Pentland says things that do not correspond to the truth. The truth is that from the day it was signed, we indicated to Pentland that there was no question of renegotiating the date of the sale or the price.'

Mr Tapie is obviously 'very sore', said Mr Farrant. 'Tapie has come out of this with his costs uncovered, and is still highly leveraged. I don't know what will happen from here. We don't know what Tapie's bankers will do.

'If they came back tomorrow we would have to listen,' he added.

The City could only speculate about what Pentland had found. Worse-than-expected trading, an asset shortfall, contingent liabilities or surprise business practice were all mentioned.

'Once one or two problems arise, there comes the thought as to how much rot there is. Mr Tapie always seems to be surrounded by controversy, which will make a firm like Pentland even more cautious,' said Alex Magona, analyst at MAP Securities, the broking house.

Adidas made pounds 7.6m before tax in 1991 from pounds 1.6bn of sales and licence income.

But Pentland walks away still holding a 20 per cent stake, pre- emption rights on the outstanding shares, and a net pounds 20m profit from the DM135m it bought at a rate of DM2.95 to the pound to fund the deal.

The company, which owns the Speedo sportswear business and which found fame through its 1980s investment in Reebok of the US, has net cash of pounds 300m.

Adidas is ultimately owned by BTF of Germany. Mr Tapie withdrew from BTF management when he briefly joined the French government earlier this year, but retains his controlling stake.

He resigned from the government after 52 days as Urban Affairs Minister because he was charged with misappropriation of funds in previous business dealings. The case is before the courts.