US giant trumps FKI's bid for Newman Tonks

`The reaction from the Stagecoach camp was one of pained innocence. Take advantage of the travelling public? Who us? Can this be the same company that was found to be acting in a manner that was "predatory, deplorable and against the public interest" when the MMC paid a visit to Darlington?'
Ingersoll-Rand, the US engineering giant, yesterday made a surprise entry into the battle for control of Newman Tonks by launching an agreed cash bid valuing the building products group at around pounds 230m.

It is the second time in a week that a hostile bid in the normally sleepy engineering sector has taken an unexpected turn after William Cook, the steel castings group, unveiled plans to thwart a hostile bid by Triplex Lloyd and take the company private.

Ingersoll's 175p-a-share offer is being recommended by the Newman Tonks' board and trumps a hostile bid from FKI, a much smaller engineering group, that put a pounds 195.7m price tag on Newman. Shares in Newman closed 29p higher at 180.5p.

Last night Ingersoll Rand sought to turn up the heat on FKI by going into the market and buying a 3.8 per cent stake in Newman at 179p. Newman's directors have also pledged their 0.9 per cent holding to Ingersoll.

FKI, which already speaks for 21 per cent of Newman Tonks, said it was considering its position. But analysts reckon FKI could easily afford to pay up to pounds 2 a share to land Newman.

"Ingersoll Rand is a hefty company to get into a head-to-head with," said Sandy Morris at ABN Amro Hoare Govett. "But once you have set your stall out to bid for a public company you should not be deterred. Strategic reasons could make dilution more palatable for FKI."

Brian Jellison, Ingersoll-Rand's vice-president, said the deal with Newman Tonks, its biggest in Britain, would shape the US group's European strategy and create an architectural hardware business with a full product range. He declined to say how big architectural products were within the Ingersoll Rand group, which last year posted sales of $6.7bn (pounds 4.13bn).

Newman also forecast profits before tax, exceptional items and bid costs of not less than pounds 18m in 1996, over pounds 2m above analysts' consensus forecasts.

Mr Jellison said the forecast, leaked last week, was not a factor in launching the bid. "We thought we could ascertain the value of Newman Tonks' business without the profits forecast," he said.

Mr Jellison revealed that Ingersoll Rand had talked about business opportunities with Geoff Gahan, Newman's chief executive, in the past. "But the hostile bid accelerated our getting together," he added.

Ingersoll first contacted Newman Tonks shortly after FKI launched its pre-Christmas bid. Serious talks began earlier this month.

Ingersoll employs 2,600 staff in the UK while Newman has 4,000 employees. Cost-cutting was not a factor behind the bid, said Mr Jellison without giving any firm job guarantees.

The takeover saga got off to an unusual start when M&G, Newman Tonks' biggest shareholder with 11.2 per cent, irrevocably accepted FKI's bid on day one.

"Our acceptance still stands," a spokeswoman said. "But if Ingersoll Rand's bid is successful and FKI's bid lapses we would get the higher price."