£1.5bn Colfax bid looks to have won the war for Charter

ONE of Scotland’s biggest engineering firms looks set to fall under US ownership after the board of Charter International, parent company of Renfrew-based Howden, yesterday recommended a £1.5 billion bid from Colfax.

The 910p a share approach is £90 million more than rival suitor Melrose had indicated it was willing to bid for Charter, which also owns welding equipment group ESAB.

Although Melrose is considering its options and may make a higher offer after it has carried out due diligence on the company, many analysts believe it is now effectively a done deal.

Lars Emilson, Charter’s chairman, said the Colfax offer was “attractive”, adding the US firm also had a strong reputation for quality brands and taking a long-term view on its businesses.

“Colfax has committed to provide continued stability for our employees and continued development of the ESAB and Howden offering for our customers,” he said.

Pump and valve maker Colfax was spurred into action after Melrose raised its offer for the third time and Charter opened its books for due diligence to the UK-based turnaround specialist. Melrose has until 21 September to decide if it will top the US group’s offer.

The cash and share offer from Colfax is worth £1.53bn in total and will be funded by an equity issue, debt facilities and existing cash resources

Colfax said it would be a “transformational acquisition” which would realise significant benefits for both companies.

President and chief executive Clay Kiefaber said the Howden business, which specialises in industrial equipment including air compressors and fans, will be a “great complement to our existing speciality fluid handling business”.

Howden employs 4,360 staff – 810 are UK based – while Hertfordshire-based ESAB has 200 UK employees out of a total of more than 9,000.

The Colfax bid represents a 13 per cent premium to Friday’s closing price and a 48 per cent premium to the price in June before Melrose made its first approach.

Dominic Convey at Peel Hunt said the rise in the Melrose share price following the announcement suggested its investors thought “the deal was done” and that the prospect of a large rights issues to fund the acquisition was fading.

The Takeover Panel said yesterday that Melrose will have to announce its intentions before Charter shareholder meetings to consider the Colfax offer.

There was speculation yesterday that Melrose may now turn its sights on another UK industrial firm, Cookson.

Charter can trace its history back to 1889, when the British South Africa Company was formed and takes its name from the Royal Charter granted by Queen Victoria to the company in that year.

In 1994, Charter acquired ESAB followed by Howden three years later.

Charter shares closed up 53p, or 6.6 per cent, at 857p, while shares in Melrose were up 9.2p, or 3.3 per cent at 289.2p.