View from City Road: Laporte looks like a winner

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The Independent Online
SHAREHOLDERS in Evode, the glue maker, cannot believe their luck. They have seen their shares more than double in value between early November and yesterday, when they closed at 129p. Having enjoyed the fun they must now get down to the serious business of deciding whether to accept Laporte's cash or its shares or to sell in the market.

The first closing date is Wednesday and, with no other bidders on the scene, it could be the last.

Laporte is offering 115p in cash or 131p in shares, based on yesterday's closing price of 638p. On that basis there is no point in accepting the cash offer - those wanting cash would be far better off selling their shares in the market, even taking account of the dividend, worth 1.8p a share.

That leaves shareholders with a choice between selling in the market and accepting Laporte's paper offer. With institutions facing hefty demands on their cash later this year, there will be a strong temptation to sell.

But that should be resisted. Laporte is a well-managed company, which meant what it said when it promised no earnings dilution. Its shares are trading on 15 times prospective earnings, which looks a modest multiple given its record.

There is plenty of scope to improve Evode's performance. Its margins of less than 5 per cent are roughly a third of Laporte's and will soon increase under its tougher management. There is also scope for the chemicals company to use Evode brand names for its building products and vice versa.

Evode's holders should take the shares and Laporte's should apply for more at 560p in the open offer.