Henlys ahead in race for Dennis

Coach maker Henlys has secured acceptance from the board of bus manufacturer Dennis for a revised merger offer, in the face of a sharp fall in Henlys’ shares and a rival bid from engineering firm Mayflower. A 450p-a-share bid tabled at the start of last week by Mayflower prompted Henlys to revise an earlier bid, […]

Coach maker Henlys has secured acceptance from the board of bus manufacturer Dennis for a revised merger offer, in the face of a sharp fall in Henlys’ shares and a rival bid from engineering firm Mayflower.

A 450p-a-share bid tabled at the start of last week by Mayflower prompted Henlys to revise an earlier bid, to a cash-and-paper offer of seven new shares plus 150p for every two Dennis shares.

Despite a 52.5p fall in Henlys’ shares on Friday, to 512.5p, the revised offer valued Dennis at £290.5m, compared to £255m under Mayflower’s bid.

The board of Coventry-based Dennis unanimously recommended Henlys offer. It said it was rejecting Mayflower’s bid because it offered ‘little strategic logic’ and would pose a tough financial challenge’ for the engineering firm to see through.

Henlys and Dennis first announced plans to merge three weeks ago, with Henlys offering 64 new shares for every 100 Dennis shares.

Analysts were divided as to whether Mayflower will table an increased offer for Dennis. The company said it believed its bid represented good value, adding that it consisted of three times the amount of cash Henlys was putting down.

Mayflower had previously indicated it had the financial muscle to increase its bid, but one analyst said any further substantial improvements to the bidding price would result in the successful buyer over-paying.

Analyst Tim Kluczkowski at Granville Davies said the merger would not produce quick savings, but it made ‘more strategic sense than a tie-up with Mayflower’.

The Dennis-Henlys combine would speed expansion into the Far East and European markets where both firms are making inroads.

Henlys chief executive Robert Wood suggested that Mayflower shareholders would be concerned about its bid for the business.

‘Mayflower would be left with interest cover of just three times earnings and gearing of more than 200% on a proforma basis, compared with 10 times and gearing of 21% at Henlys.

‘Henlys is ready to roll and be a realistic player in the global bus and coach market. The offer will not leave us financially stretched,’ he said.