US fund in Hillsdown bid

HILLSDOWN HOLDINGS appeared to be heading for break-up yesterday when the Typhoo tea and Chivers Hartley jams group said it had received several approaches that could lead to a pounds 430m bid for the company.

It is understood that the most likely buyer is Hicks, Muse, Tate & Furst, the American leveraged buy-out fund whose protracted talks with Pearson to buy part of Simon & Schuster business collapsed earlier this year. Its offer is likely to be pitched at around 120p per share, giving Hillsdown an enterprise value, including debt, of over pounds 500m. The shares closed 26p higher at 112.5p yesterday, a rise of 30 per cent.

There are other bidders looking at the company but it is understood that Hicks, Muse is the lead buyer and that talks are at an advanced stage. Hicks Muse would only be interested in certain parts of Hillsdown, such as its successful canning business and the Christie Tyler furniture operation. The rest, such as poultry and biscuits, is likely to be sold.

Hillsdown said it would issue another statement in due course on the approaches but it is thought it that the company would find it difficult to fight a bid. Large parts of its stock are held by US arbitrageurs which have used stock loaning procedures to ensure they do not appear on the share register. It is thought they will sell out to the highest bidder. It would not be the first time Hillsdown has been the subject of a break- up bid. Last year Unigate made an approach regarding a possible pounds 1.6bn takeover but walked away at the last minute.

Hillsdown pressed ahead with a demerger strategy instead, spinning off Fairview Homes and Terranova Foods, its chilled Foods operation which succumbed to a pounds 274m hostile bid from Unigate last month.

It also announced its intention to sell its poultry, wines and spirits, continental biscuits, furniture and potato operations. However, initial indications of interest in the furniture and potato businesses failed to be converted into firm offers and the sale was pulled. The delay in the proposed sales meant the company was unable to return cash to shareholders as previously planned.

Hillsdown did manage to sell its high margin poultry business Ross Breeders for pounds 100m in December. It also sold its continental biscuits business for pounds 42m in February and recently sold its Dutch canning operations for pounds 25. Gearing is currently around 80 per cent.

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