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Bob the Builder trims estimate for takeover of Thomas to £139m

Liz Vaughan-Adams
Wednesday 26 June 2002 00:00 BST
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HIT Entertainment, the owner of Bob the Builder, officially launched a fresh bid for rival Gullane Entertainment yesterday, albeit one that valued the Thomas the Tank Engine owner at £18m less than the previous offer.

The company, which reconsidered its 500p-a-share offer after Gullane issued a profits warning, said it was now prepared to pay about £139m, or about 430p a share, for the business. HIT has already received acceptances for more than 50 per cent of Gullane's stock including "yes" votes from co-founders Britt Allcroft and Angus Wright, who together own about 11 per cent of the company.

Peter Orton, HIT's chairman, said: "The combination of our two businesses represents an exciting opportunity which I believe will deliver significant benefits to the shareholders of the enlarged group. Our offer has already secured support from over 50 per cent of Gullane's shareholders."

But Gullane, which said it had been in talks with HIT and "other potential bidders", said it was "considering its alternatives" and urged shareholders to take no action for the time being.

After rumours surfaced last week that HIT was preparing to make a 430p-a-share offer, Gullane admitted it had received such an approach but said it believed it "materially undervalued" the business.

HIT said yesterday that despite the initial rejection, it had decided to extend the offer to shareholders for their consideration anyway "in view of the strong merits" of the offer and the existing support for the deal.

Gullane shares finished up 12.5p at 425p last night while those of HIT, which also owns Barney the Dinosaur, Pingu and Angelina Ballerina, closed down 0.5p at 278.5p.

HIT's offer of 1.5412 of its own shares plus 860p of cash for every three Gullane shares, represents a premium of about 4 per cent over Gullane's closing share price on Monday.

Full acceptance of the deal would see Gullane shareholders end up owning about 11 per cent of the combined company and would involve HIT having to pay out about £93m out of its newly negotiated bank facilities.

HIT, which first held offer talks with Gullane in late 1999, insisted yesterday there was a "strong business rationale" for a merger. The move, it said, would give Gullane's brands, which also include Captain Pugwash, Sooty and Fireman Sam, greater exposure to the key US market.

Ms Allcroft, the co-founder of Gullane, said: "I am convinced that together HIT and Gullane can significantly enhance shareholder value."

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