Reuben brothers look to beat £1bn McCarthy offer

The UK's largest retirement home builder, McCarthy & Stone, looked to be heading towards the centre of a bidding war yesterday, as the billionaire Reuben brothers said they were considering trumping a 1,000p-a-share offer for the group from Permira and Barclays Capital.

The McCarthy & Stone board knocked back an informal 1,030p offer from the Reuben brothers late on Sunday night, deciding instead to recommend the lower but firmer bid from the Barclays and Permira-backed consortium, Mars Bidco.

The Reuben brothers' bidding vehicle, Broomco - which is backed by the Bank of Scotland as well as Sir Tom Hunter's private equity group, West Coast Capital - has yet to complete its due diligence on the company. However, in a statement issued yesterday morning, it said it expected to complete its analysis soon, after which it hoped to "be in the position to make a further proposal to the board".

Shares in the company raced past Broomco's 1,030p indicative offer yesterday, as investors anticipated a bidding war for the company. The property tycoon Vincent Tchenguiz is also believed to have made an informal approach to the group, and is thought to be mulling a higher offer. Like the Reubens' consortium, however, he has yet to complete his due diligence. Furthermore, it is believed he has not yet secured financing for his approach.

By yesterday's close, the shares had reached 1,048p - up 11.3 per cent on the day - giving the company a market value of £1.076bn.

The Mars Bidco offer represents a 37.7 per cent premium to McCarthy & Stone's average share price over the six months to 1 June - the last day before the group revealed it had received a number of approaches. The offer values the company at £1.028bn.

In a separate statement yesterday morning, McCarthy & Stone's chairman, Keith Lovelock, said he believed the Mars Bidco offer provided more certainty for shareholders. "Compared with the other approaches we have received, we believe the offer provides certainty for shareholders and the company at a value which fairly reflects the strengths inherent in the business." He added that shares in the group had returned about 280 per cent since 1 September 2001, equivalent to an annual return of 24 per cent.

The offers come three years after the group rejected an offer of 520p a share from its founder and former chairman, John McCarthy, who subsequently quit the company and sold his stake.

Chris Millington, an analyst for Bridgewell, said: "On the basis of the second approach, we would not rule out an auction for the stock, in which case this would push the shares beyond the 1,030p approach."