Components and tools company Howle Holdings last week accused bid target Brooke of `saddling shareholders with debt’, following Brooke’s acquisition of South African steel cutting tools business Somta.
The war of words is the latest stage in Gloucester-based Howle’s £6.29m hostile bid for Yorkshire-based Brooke.
Brooke’s £4.5m purchase of Somta will be partly financed by a three-year promissory note with an annual 8% interest rate. The £2.5m balance will be paid in cash. Brooke is also buying a freehold site in Warrington, leased by its offshoot APW, for £1.75m.
Howle, which made its hostile all-paper bid for the group last month, described the two moves as `imprudent’. Chairman George Govan said Brooke was overpaying for both the land and the company. `The amount of cash strikes me as extremely large,’ he said.
Brooke chairman John Dashper said that acquiring Somta from Anglo American Corporation of South Africa would boost margins, as its operating costs are low.
He added that the acquisition’s timing could cause Howle to walk away. This was rejected by Govan, who said it was merely `another variable’ to consider.
The Somta deal came just days after Brooke announced a half-year pre-tax loss of £583,000, compared with a £924,000 profit in the past half year. Dashper blamed the UK’s economic slowdown, weak Asian markets and the strong pound.
But Howle said the figures reveal the extent of Brooke’s problems. A spokesman added: `These results are significantly poorer than even our assumptions. Our offer is full and fair, particularly in the light of the figures.’