Hall Engineering came out fighting last week as it sought to persuade investors not to accept a ‘wholly opportunistic’ bid from acquisitive conglomerate TT Group.
The Shrewsbury-based company issued its formal defence document to shareholders, denouncing TT’s effort to take the business over as an attempt to buy it ‘on the cheap’.
TT’s offer last month of 97p a share compares with 70p a share when TT started to build its stake in Hall at the start of January.
Just before the bid was announced the shares had climbed to 107p last week they were trading at 119p, valuing Hall at £63m, or 22% above the value of TT’s bid.
Chief executive John Sword, who joined Hall from Massey Ferguson in 1994, said TT’s offer represented nothing like fair value for the business.
He said the supposed synergies between Hall and TT were so few as to be insignificant and he dismissed TT’s claims that there would be big gains from economies of scale after bringing the two companies together.
‘The restructuring under the present management team has transformed Hall,’ Sword said. ‘We’ve made more than £50m worth of capital investment over the past two financial years which will significantly enhance future profits, and we have leading positions in major world markets. None of this is reflected in this paltry offer.’
TT, however, dismissed Hall’s defence document as promising ‘jam tomorrow’.
Group chairman John Newman also questioned Hall’s plans to pay a final dividend for the year of 6.625p, keeping the total payout at 10.4p.
If shareholders vote in favour of TT’s bid, they will not get this final dividend.
‘This company is highly geared, yet it is maintaining the dividend payout. At this level it is hardly covered,’ Newman said.
‘The share price now includes a degree of hope value and I would expect it to start drifting back to our offer level.’
Sword pointed out that the price TT is offering represents a 35% discount to Hall’s average share price over the 12 months prior to the bid announcement.