Suitor Alere tightens grip on Axis-Shield, taking 30% stake

AMERICAN life sciences giant Alere appeared to gain the upper hand yesterday in its takeover battle for Dundee-based medical testing kit maker Axis-Shield after tripling its stake in the company to 30 per cent.

In a flurry of stock market announcements, the Massachusetts- based firm revealed it had increased its holding from 11 per cent to 22 per cent before the total rose again to 29.9 per cent.

Axis-Shield hit back, revealing it had been in lengthy talks with a “third-party” that had been interested in mounting a counter- bid to Alere’s hostile 460p-a-share offer, which valued the firm at £230 million.

The Scottish company said the potential competing offer “could have delivered significantly higher value” for investors.

But the third party had been unable to assemble a formal offer before yesterday’s deadline – Day 50 in the takeover tussle – by which rival suitors must put their bids on the table under new Takeover Panel rules introduced last month.

Instead, Axis-Shield said the potential suitor – whose name it refused to release – had “reserved its rights” to make an offer if Alere’s bid fails or is withdrawn.

Ian Gilham, Axis-Shield’s chief executive, told The Scotsman: “It’s obviously disappointing to see some of the big shareholders selling some of their shares but I would highlight that it’s only part of their stakes – I think there’s some hedging of bets going on there.

“Our recommendation remains that 460p doesn’t offer good value to shareholders. Alere is making a highly opportunistic offer in order to try and acquire Axis-Shield on the cheap.”

Shareholders in Axis-Shield have until 10 October to decide whether they will sell their stakes to Alere. The stock closed up 1.6 per cent or 7.13p last night at 455.5p, having hit 470p earlier in the session. Michael King, an analyst at Nomura, said it now looked more likely Alere would reach its target of buying 50 per cent of Axis-Shield’s shares, but that it was not yet “game over”.

He added: “There are still ten days to go so there’s still plenty of time. It all now depends on what other big shareholders will do, so hopefully things will become clearer next week.”

Numis analyst Charles Weston, another long-term Axis-Shield watcher, agreed Alere now had the upper hand.

He said: “It’s a shame the third party and Axis-Shield didn’t make the potential approach public sooner by a day or two. The longer-term shareholders may have made a different choice about selling if they’d known about the third party.”

Much of Alere’s stake-building took place during Thursday’s trading, before yesterday’s statement from Axis-Shield revealing news of the third party’s interest.

Mark Niznik, a fund manager at Edinburgh-based Artemis and a supporter of Axis-Shield’s board’s stance over Alere’s offer price, said: “I still think Alere is getting Axis-Shield on the cheap. I wanted to hold out for a higher price but it looks like other investors got nervous with the turmoil in the stock market.”

Legal & General, Axis-Shield’s second-biggest investor after Alere, sold 158,100 shares at the offer price, taking its holding down to 4.5 million shares or 9.1 per cent of the firm, while Royal London parted with 382,250 shares at the same price, leaving it with 320,357. Some institutions sold their entire holdings, with Canada Life parting with 600,000 shares and Variopartners dumping a million shares.

So-called “arbitrage” funds – which take advantage of price differences in markets in order to make money – unwound long positions on their contracts-for-difference. First Eagle off-loaded 1.2 million shares and Healthcor jettisoned 848,665.