Melrose walked away from its £1.4bn takeover plan despite finishing its due diligence on Charter and saying it had the required debt funding ready to use.
“Melrose announces it has completed due diligence and has agreed terms with its financing banks. However, in the current climate Melrose is of the view it is not in its shareholders’ best interests to proceed,” it said in a statement.
Sources familiar with the situation told City A.M. Melrose’s cash-and-share offer was a casualty of the panic selling in stock markets since August, which cut 18 per cent from Melrose’s share price. Charter’s share price in contrast stayed high thanks to the bid talk, slashing the real value of Melrose’s 850p offer to just 806p.
Melrose would have to see its shares gain about 30 per cent before an offer for Charter would become affordable, the sources said, while Melrose was reluctant to overpay.
“They simply were not prepared to raise the offer, particularly with the economic turmoil we are seeing at the moment,” one said.
Charter’s board, which has recommended a 910p cash and paper offer from US rival Colfax, said it was delighted its decision was vindicated.
“The board of Charter have secured very good value in difficult market conditions. The board has at all times acted in the interests of the whole shareholder base. The board was absolutely right to recommend the offer from Colfax,” a spokesman said.