Charter rejects £1.3bn offer from Melrose as too cheap

ENGINEERING group Charter International rejected an approach from turnaround house Melrose yesterday, saying its unsolicited 780p-per-share offer substantially undervalued it.

Charter’s shares jumped 28 per cent after Melrose made the surprise approach for the firm, which has issued three profit warnings on its two divisions -- welding company ESAB and air and gas handling arm Howden -- in the past year.

“The board of Charter reviewed the proposal with its advisers and rejected it. The offer is opportunistic and substantially undervalues the company and its prospects,” Charter said in a statement.

Analysts at Killik said Melrose’s approach was welcome but that the price would have to rise. “We believe Melrose will probably need to sweeten its offer, in part to persuade Charter to open its books,” they said.

Collins Stewart analyst Mark Wilson said Melrose could face counterbidders, while a sum-of-the-parts analysis showed buyers could gain value at even a 1000p per share offer.

Charter’s chief executive Mike Foster resigned on Tuesday following a profit warning last week that caused its shares to drop 25 per cent.