IMI emerges with pounds 337m bid for Polypipe

IMI, the Birmingham-based engineering group, emerged as the bidder for Polypipe yesterday when it tabled an agreed 200p-per-share cash offer for the plastic pipemaker, valuing the company at pounds 337m.

The announcement, which came a day after Polypipe had said it was in advanced talks on a deal, pushed the company's shares up 8.5p to 202p, with some analysts predicting rival bids.

"If IMI get it at this price they have got themselves a wonderful deal," said Mark Cammock at Merrill Lynch. Other bids could come from continental Europe, with PipeLife, an Austro-Belgian joint venture, still seen as a candidate.

IMI said it had received irrevocable undertakings from shareholders representing 20.6 per cent of Polypipe's share capital. These include the group's 65-year-old founder and chairman, Kevin McDonald, whose 16.7 per cent stake is worth pounds 56m. IMI was buying Polypipe shares in the market yesterday in an attempt to mop up more stock.

The Birmingham group makes hydraulic controls, drinks dispensers and energy controls such as copper tubing and valves for radiators. However, it has no representation in the plastic pipes sector that is Polypipe's strength.

IMI has been seeking additional market share for plastic fittings in the heating and plumbing industries, analysts said. Plastic is cheaper and less vulnerable to commodity price fluctuations than metals such as copper.

"It is a defensive move by IMI, but they are buying some very good industries," said Robert Griffiths, equities analyst at Albert E Sharp Securities in Birmingham.

IMI, which recorded profits of pounds 167m on sales of pounds 1.4bn last year, says the Polypipe deal will give it a broader product base to push through its pan-European distribution network. There will also be cost savings from greater buying power and a streamlined sales network, although the cost benefits have not been quantified. Mr McDonald will join IMI's board as a non-executive director.

IMI's gearing will rise to more than 100 per cent, but interest cover will be a comfortable seven times, the company said.

Polypipe recorded profits of pounds 34.6m on sales of pounds 273m last year. Shareholders will still be entitled to the 1.2p interim dividend payable on 23 April.

IMI shares rose 27p to 299p yesterday, sparking a flurry of price rises in the engineering sector.