Tomkins buy-back confuses market

Tomkins threw the market into confusion yesterday as it signalled to the Stock Exchange that it planned to apply for the powers to buy back up to 10 per cent of its shares.

Investors were surprised by the announcement because a buy-back, costing almost pounds 300m at the current share price, would fly in the face of recent statements from the Ranks Hovis to Smith & Wesson conglomerate.

Greg Hutchings, chairman and chief executive, is known to oppose handing money back to shareholders because of the constraints reducing the company's cash pile would impose on future acquisitions. He argued recently that there was no point paying money to investors only to ask for it back again if an attractive deal came up.

Tomkins, which may not use the powers for several years, if at all, made the announcement yesterday to comply with the Stock Exchange's listing rules. They state that on the same day a company sends shareholders notice of a meeting at which it intends to seek buy-back powers, it must issue a general announcement to the exchange.

In these circumstances it is usual practice to wait until the close of business to avoid any confusion in the market. BZW, Tomkins' broker, issued the statement yesterday three and a half hours before the end of official dealing.

Tomkins shares closed 9.5p higher at 248.5p as the market speculated on the company bidding for its own shares. The shares, which had already risen when the announcement appeared on trading screens at lunchtime, moved further ahead during the afternoon.

Some dealers cited the possible injection of pounds 294m into the market as one reason for Footsie's strength yesterday.

Comment, page 17