Battle for Lloyds Chemists renewed

The pounds 650m bid battle for Lloyds Chemists sparked into life yesterday after Gehe, the German bidder, said its rival UniChem would be better off mounting a share buy-back than bidding for Lloyds.

In an echo of past attacks on UniChem, Gehe claimed the other bid held "substantial risks" for shareholders in both companies. In a letter addressed to UniChem's shareholders, Dieter Kammerer, chairman of Gehe's management board, said they would gain more from a buy-back of UniChem shares at current levels than from acquiring Lloyds.

Buying 20 per cent of its shares would see a 13 per cent earnings enhancement in 1997, Gehe contends.

By contrast, if certain risks such as higher interest rates or the failure to achieve the planned synergies had materialised last year, the group would have suffered earnings dilution of over 15 per cent last year.

The latest onslaught in the bid battle, approaching its first anniversary, drew an immediate riposte from UniChem. Jeff Harris, chief executive, dismissed the claims as uninspired.

"Gehe recognises the benefits of combining UniChem's business with Lloyds and that's why time after time it has tried to to paint a negative picture about our bid for Lloyds. Combining Lloyds and UniChem is expected to deliver an enhanced earnings stream for shareholders and to deliver value. Lloyds' shareholders should recognise the value of UniChem's offer."

There is not expected to be a high level of acceptances for UniChem's cash and shares terms when the results of the second closing date yesterday are announced on Monday.