Tyco renews its Williams courtship

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The Independent Online
TYCO INTERNATIONAL, the US fire protection and electronic security company that is global leader in manufacturing electronic components, has renewed talks about launching a friendly takeover bid for Williams, the fire protection and security equipment company.

It is understood Tyco has again approached Williams, even though an earlier approach was rebuffed by the UK company's board. Williams is expected to formally acknowledge the renewal of take-over talks in an announcement prior to the opening of the stock exchange this morning.

People familiar with the situation characterised the negotiations as preliminary. It is believed that nothing has been settled about the pricing or structure of a possible bid.

Tyco's earlier approach was rejected by Williams' board as being priced too cheaply. Last autumn the UK group responded to news of the talks by declaring that they were already over.

Roger Carr, Williams' chief executive, and Dennis Koslowski, Tyco's chairman, are understood to have met earlier this month and agreed to resume negotiations. Last week, the share price of Williams rose on rumours that Rentokil was preparing a bid.

If a Tyco bid succeeded, it would make the US company the world's biggest security and fire protection business. It would combine Williams' wide range of fire and security products with ADT, the security business created by Michael Ashcroft and bought out by Tyco three years ago.

Tyco is thought to view Williams as a good strategic fit. It also is attracted to the UK firm's repositioning as a service business in strong growth sectors. Bankers and analysts have expected the US company to return to the negotiating table with a higher offer. They expect Tyco would need to offer around 500p per share compared with Williams' closing price Friday of 388p. Since talks between the companies collapsed, Tyco has gone on a wide ranging acquisitions spree. It paid $11bn for AMP to become the global leader in electronic connectors and last month paid $3.3 bn on Raychem to expand its electronics operations.

Tyco's market capitalisation has soared to $73bn, boosted by the deals and a rising share price. That would make a pounds 3.6bn bid for Williams easy for the US firm to digest.

The deals have also charged the company's earnings and sales growth. In the second quarter to March, Tyco pre-tax profit before an extraordinary item jumped 52 percent to $459.3m and sales grew 25 percent to $3.96bn from the year ago period.

During the 1980s, chairman Sir Nigel Rudd took a stake in Williams and turned it into an acquisition vehicle, buying a wide array of businesses. In the 1990s, the group's focus has narrowed as investor fashion turned against conglomerates.

Tyco's move follows a recovery in Williams' prospects. In 1998, Williams nearly doubled pre-tax profit to pounds 462.5m on a 9.8 percent rise in sales to pounds 2.45bn.

Schroders and CSFB, respectively Williams' financial advisor and broker, are advising the UK firm on the talks. Tyco is being advised by Merrill Lynch.

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