US industrial giant Colfax raised the stakes in the battle for Charter International yesterday, tabling a formal bid valuing the company at £1.5bn and gaining the backing of Charter’s board.
Colfax, which makes industrial pumps and valves, tabled a 910p per offer with 80 per cent in cash and the rest in its shares, trumping rival bidder Melrose’s highest indicative offer of 850p per share.
But sources familiar with the process told City A.M. that Melrose, a turnaround investment firm, was “still in the game” and may muster support from long-term Charter shareholders who were lukewarm about taking shares in a US company.
Colfax said buying Charter would give it more diverse revenue streams and new product platforms but also a bigger presence in emerging markets.
“Charter’s air and gas handling business (Howden) would extend Colfax’s existing fluid handling platform, and Charter’s welding, cutting and automation (ESAB) business would establish a new growth platform,” it said in the offer statement.
“Colfax believes there are significant upside opportunities from applying its established management techniques to improve both margin and return on invested capital.”
Charter’s board recommended investors vote for Colfax’s offer and said the directors would support it with their total 0.1 per cent stake.
But the offer of Colfax shares could be difficult for Charter investors such as fund managers that can only hold UK paper, and City A.M. understands that major investor Schroders was unimpressed at the offer structure.
A Colfax spokesman told City A.M. it included the paper element as “there was demand to share the upside in Colfax as an enlarged company”.
Those investors holding shares in Melrose as well as Charter may also continue to push for a sale to Melrose – but as Charter’s shares closed at 857p yesterday, Melrose may have to raise its price. The Takeover Panel said Melrose had until ten days before the vote on Colfax’s offer to either make a formal bid or walk away.
MEET THE ADVISER: DEUTSCHE BANK
RICHARD SHEPPARD UK HEAD OF M&A
DEUTSCHE Bank is advising US manufacturing firm Colfax on its cash and share bid for Charter International, fielding a team fronted by Richard Sheppard, the bank’s newly appointed UK head of M&A.
Sheppard moved into the role from his previous position as Deutsche’s head of European industrials M&A at the end of July 2011. He is joined by Scott Bell, who has also been recently appointed as head of UK investment banking coverage and advisory. Charles Wilkinson, co-head of corporate broking, and James Cass director of UK M&A, are also working on the deal.
Last month, Deutsche Bank was sole adviser and corporate broker to Northumbrian Water during its takeover talks with CKI, the investment consortium led by chinese tycoon Li Ka-shing. The bank was also appointed as broker to Stagecoach Group on Friday, marking a coup for the firm.