Game up for Tomkins as buyers target UK

ONE of the City’s largest investors warned foreign predators not to view UK companies as easy pickings yesterday after Tomkins became the latest name to fall to an overseas bid.

Standard Life Investments (SLI) made an angry intervention after shareholders in Tomkins, the former “buns-to-guns” group, voted to accept a £2.9bn offer from a consortium of Canadian funds. Private equity player Onex and the Canada Pension Plan Investment Board will now take the conglomerate private within weeks.

David Cummings, head of UK equities at SLI, said the transatlantic offer “undervalues Tomkins’ future prospects”. He added: “We also hope this vote will not be seen as a signal to other potential bidders for UK corporates that UK shareholders are prepared to sell assets too cheaply as a consequence of current depressed market valuations.”

Cummings’ remarks follow a string of buyouts of London-listed outfits. Since the start of the year fund managers have seen US companies Kraft and Emerson Electric take over Cadbury and Chloride respectively, while French firm GDF Suez has seized control of International Power. American buyout house Apollo is scrutinising Brit Insurance on the basis of an £851m indicative offer.

Tomkins’ board, led by chief executive Jim Nicol, came under fire in July for opening the books to the Canadian bidders without consulting shareholders. At the time, SLI voiced the discontent of other investors by accusing Nicol of engaging in talks for a 325p-per-share offer that “materially” undervalued the automotive and industrial parts manufacturer.

But investors accounting for more than 90 per cent of Tomkins’ shares gave a green light to the sale yesterday. Among those voting in favour were blue-chip institutions Schroders and Aberdeen Asset Management.

A source close to the company played down the significance of the near-10 per cent of holders who rebelled, saying: “I don’t think it’s completely out of the way with what we’ve seen in other transactions.”

Tomkins, which earned the “buns-to-guns” moniker for its brief ownership of Rank Hovis MacDougall and Smith & Wesson in the 1990s, will be sold at the end of September subject to anti-trust clearance. The deal marks the end of the Square Mile’s relationship with a firm that began as a belt buckle maker in 1925 and grew into an industrial giant under the stewardship of controversial tycoon Greg Hutchings, before slimming down in the 1990s.

Neil Vickers, a mergers and acquisitions adviser at law firm Denton Wilde Sapte, predicted a further raft of offers for UK companies from US and Asian buyers. “It’s difficult for boards to defend against bids because it’s hard to see where the price should be given unpredictable markets,” Vickers said. “Companies that are cash-rich are making the most of their opportunities and we’re seeing that coming through right now.”

Paul Zimmerman, a partner at Deloitte, said: “Some of it can be opportunistic, but some of it can be part of a grand strategy where a US or Far Eastern firm wants to get a foothold in Europe.”