Chloride takeover powers up as Emerson returns with $1.5bn offer

THE US/Swiss takeover battle for former British battery manufacturer Chloride was galvanised yesterday after spurned US suitor Emerson Electric hoisted its offer to nearly £1 billion ($1.5bn).

The new proposal from Emerson is 15 per cent above the 828bn ($1.25bn) deal previously agreed by Chloride with Zurich-based firm ABB.

Chloride, which helps blue-chip firms to protect against power outages, saw its shares jump 11 per cent to trade above Emerson's sweetened offer - up by about $500 million on the Americans' most recent bid. Analysts said the market could therefore be betting that ABB may return to the fray and top its rival's increased offer.

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Chloride said it would "engage with Emerson to clarify certain aspects of its offer" before saying more. Under the agreement with ABB, if Chloride tells the Swiss firm that it has received a superior offer, then it has 48 hours to match or better that proposal. ABB said it was considering its options. David Stormont of Hermes Investment Management, which owns 1 per cent of Chloride, said Emerson was paying the price for an earlier, "lowball" offer.

Stormont added: "Emerson is facing the prospect of a very powerful group, ABB, coming into one of its core markets and it will pay up to avoid that."

However, Seymour Pierce analyst Ian Robertson said ABB's surprise participation in the auction of Chloride could create a serious threat to Emerson's key power business outside Europe and "has pushed Emerson to pay ransom-strip prices for what is a relatively mundane business".

Chloride employs 2,300 people in 15 countries, of which 374 are located in the UK, including an office in Aberdeen.

Emerson, based in St Louis, Missouri, tabled its first recent offer for Chloride in April - two years after it failed with a previous proposal. Its latest bid arithmetic is based on achieving 33m of synergy savings from a takeover.

Chloride's stock has doubled in value in the past three months as the bid saga has unfolded. The stock closed up 38.6p yesterday at 387.1p.

Numis Securities said the revised bid was at a higher level than it thought Emerson would be prepared to offer. However, analyst Scott Cagehin added: "ABB is in a strong position to respond having carried out its due diligence and is armed with a large net-cash balance sheet."

Emerson has offered 375p a share for Chloride, up from the 325p a share agreed by ABB, and valuing Chloride at 997m.

Neil Hermon at institutional investor Henderson, said there was "a reasonable chance" that ABB would increase its offer, but he said the Swiss would probably have to offer at least 400p a share to win.

ABB is a specialist in power and automation technologies that enable utility and industry customers to improve their performance. It has 117,000 staff and operates from more than 20 locations in the UK, employing 2,300 people.

Analysts said ABB was keen on a deal with Chloride because it has no presence in uninterruptible power supply (UPS) systems.

Emerson is already a major player in UPS and said its plans for a merger deal with Chloride therefore made a better fit. David Farr, chairman of Emerson, said: "The geographic reach and offerings of Emerson and Chloride are highly complementary and highlight the strategic importance of the transaction."

Emerson, which employs 130,000 people, expects that Chloride will form the basis of its European UPS growth strategy.