TT Group executive chairman John Newman will have to decide by the end of today whether to raise his £51.6m hostile bid for Hall Engineering.
Newman said on Monday that he has £170m for acquisitions and that he is ‘eager’ to maintain his 100% record in hostile takeovers.
Hall recorded a slide in 1998 pre-tax profits to £14.64m from £18.28m the year before, even though sales were boosted from £210m in 1997 to £267m in 1998. The company rejected TT’s January offer of 97p per share as ‘derisory’. Hall shares were trading at 140p on Tuesday.
Hall’s board emphasised that the company has invested £50m in its factories over the past two years and claimed that it has ‘adequate resources’ to take the group forward. The company also revealed a joint venture with Dutch firm Polynorm to bid for vehicle body production projects in Europe and elsewhere.
Newman announced TT’s 1998 pre-tax profits of £65m up 4% on 1997, on a turnover down 1.8% to £619.9m. He said he might consider offering equity to secure the Hall deal. But at the low level of his own company’s shares, analysts believe this looks unlikely.
Newman believes Hall is too small to survive on its own. But Hall’s chief executive, John Sword, said that he is weighing up a management buy-in for the firm. Newman estimates that Sword would need around £105m to make a bid at the current share price £70m for the firm, £35m to cover its debts.
Some analysts question whether Hall would be a good fit with TT. ‘TT is better off without Hall,’ said one. ‘That’s not to say TT would not do a good job in turning Hall around. It’s just that industrially, it doesn’t make sense. The market would much rather see TT focus on electronics than diversify into Hall’s businesses.’
With possibly more than £170m to spend on acquisitions, and if it uses its full 80% gearing, TT could have other targets too.