Axis-Shield soars 49% as US offer sparks talk of bid war

RIVAL bids are expected to emerge for Axis-Shield after the Dundee-based medical testing kit maker yesterday revealed it had rejected an offer from New York-listed Alere, valuing the firm at £230 million.

Shares in Axis-Shield rocketed by 49.3 per cent, or 165p, to close at a ten-year high of 500p after chief executive Ian Gilham said the 460p-a-share unsolicited approach under-valued the business. The board refused to enter into discussions with its American suitor.

City analysts linked life science giants Abbot, Roche and Siemens with possible bids for the Scottish firm, which makes testing kits for flu, diabetes and rheumatoid arthritis.

Alere, one of the biggest players in the medical testing market, made its approach at a 37 per cent premium to Tuesday's closing price and 45 per cent above the average closing price for the past six months.

Julie Simmonds, an analyst at Collins Stewart, said the proposal under-valued Axis-Shield compared with recent sales multiples in the sector and suggested a price closer to 550-600p "would seem more appropriate".

Part of Axis-Shield's attraction is its Afinion machine, which can run several tests on a single sample at the same time.

The firm is developing a new lipid test - to measure cholesterol and other indications of heart and lung disease - to run on the machine to capture a share of the $1 billion (621m) lipid market.

Simmonds said: "We expected Axis-Shield to become an acquisition target once it had achieved an installed base of 15,000 Afinion units - compared to its current 10,000 - and had launched the lipid panel. The cost of developing an alternative device and achieving the installed base is substantially higher than the acquisition cost."

News of the approach - which was made on 7 June but was only made public by Alere yesterday in an apparent attempt to bring Axis-Shield's board to the negotiating table - came a day after the Scottish firm's pre-close update, which showed a 10 per cent rise in interim sales.

Gilham said the increase had been driven by rising Afinion sales in Germany, Switzerland and the United States and predicted further gains after permission was granted to sell the machine's diabetes tests in China.

Axis-Shield was created in 1999 through the merger of Dundee-based Shield Diagnostics and Norway's Axis Group.

Seymour Pierce healthcare researcher Mike Mitchell upped his target price from 330p to 460p. He said: "Alere has the resources to fund an acquisition and the announcement is highly likely to draw other potentially interested parties out of the woodwork. A deal is not necessarily imminent, but we cannot ignore a cash offer of this nature."But Nick Raynor, investment adviser at the Share Centre, said short-term investors should take profits now, noting anyone who pumped money into the stock in December would be sitting on a profit of almost 90 per cent.

Massachusetts-based Alere, which last year changed its name from Inverness Medical Innovations, already has 200 staff at seven bases in the UK, including Alere Technologies, previously known Stirling Medical Innovations, which is developing heart disease diagnostic kits..