The US chemicals group criticised Allied for its poor share price performance, its disappointing investment performance and its ineffective response to rising raw material prices and the strength of the pound, which has pummelled profits.
Keith Elliott, chairman and chief executive of Hercules, said yesterday: "This is a very generous offer. Allied has underperformed the stock market by 38 per cent over the last three years. Other exporters have not underperformed by as much as others are managed better."
However, David Farrar, chief executive of Allied, blasted Hercules' bid and promised to mount a strong defence."This undervalues our company. It is an unrealistic bid. We are not for sale and have a bright independent future," he said.
Allied's shares jumped 41.4p to 167.5p, well above the offer price, reflecting the widely held view in the City that the bid is not high enough to ensure success. Analysts are predicting a protracted takeover battle which is likely to involve more than one bidder.
Michael Eastwood, chemicals analyst at Dresdner Kleinwort Benson, said: "This is not a knockout bid. A fair price for the business is around 180p."
One analyst said: "Allied is unlikely to remain as a publicly quoted company but it will probably be sold for a higher price. I wouldn't be surprised if Allied was forced to reopen talks with other groups to try and find a white knight."
Mr Elliott proclaimed: "This is a great business combination creating an excellent portfolio of speciality chemicals."
Experts believe Hercules could create pounds 200m of cost savings from the deal by 1999. However analysts point out that it does not have a UK base and is not a direct competitor in any of Allied's main businesses. A larger chemicals group which operates in Allied's markets would be able to extract higher cost savings and could afford to up the stakes.
Likely potential bidders include the US groups Dow and Allied Signal and the European giants BASF and Ciba. The cash-rich UK rival Laporte has ruled itself out of the running so far but may be tempted.
Only last week Allied admitted it was in tentative takeover talks, only to announce on Friday that they had come to nothing.Reuse content