Charter gives Melrose time

TAKEOVER target Charter International extended the timetable for potential buyer Melrose to make a formal offer yesterday, giving it two and half weeks more for its due diligence.

Charter asked the Takeover Panel to approve the extension to the put up or shut up deadline for Melrose to table an offer just a day after it admitted it was also in talks with US pump and valve maker Colfax.

Melrose asked for access to Charter’s books before it formalises its latest 850p cash and shares offer for the engineering group and can now do so until 21 September.

But the arrival of a second interested party makes a bidding war for Charter increasingly likely. Its shares outperformed the FTSE yesterday, falling just 0.4 per cent.

Sources close to Melrose said it believed Charter investors would still back its offer because they would gain shares in the enlarged group.

Alex White, corporate finance partner at BDO said this was a valuable element of the offer. “It is hard to see why an all cash bid from Colfax would be attractive given the significant upside from the ESAB turnaround plan, which forms part of the Melrose offer, and from breaking the group up,” he said.

About 30 per cent of Charter’s shareholders are also investors in Melrose and have said they would welcome more shares in a combined group.

But Colfax’s statement said it “takes a disciplined approach to acquisitions” and “is committed to maintaining a prudent capital structure”, making a high bid look unlikely.