Deal talk lifts FKI

Shares climb on whispers that Melrose has secured finding to formalise a £500m a takeover offer for the engineering group.

Hemscott Editor | 11-04-08 | E-mail Article

The manufacturing turnaround specialist Melrose has been sounding out investors over a £275m share placing at a narrow discount to its current share price, according to banking sources. They say a deal to buy FKI could be formalised early next week.

Melrose was granted access to FKI's books in early Match after it provisionally offered 40p in cash and 0.277 of new shares, equivalent to about 84p per share in total. That topped its initial 70p approach made a month earlier.

The group said in March that it would sell further new shares to finance the cash element of its bid.

FKI could still face a counterbid from Blackstone, the private equity firm that last year walked away from bid talks pitched at 130p per share.

In the wake of Melrose's bid, Blackstone last month hired Credit Suisse to examine a new approach. However, given FKI's board has opened its data room, analysts and investors believe that a counterbid looks unlikely.

Shares in FKI rose 3p to 76.25p, while those of Melrose were down 0.75p to 147.25p.

FKI shares hit a 17-year low of 43.25p in January as it struggled to find potential buyers for its underperforming Hardware and Logistex units, which are exposed to the US housing crisis. The company said in February that it would report strong trading for its year to end-March as a 25% sales increase for its energy turbines business helped offset weak trading elsewhere.

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