2nd UPDATE: ABB Drops Chloride Bid, Clears Way For Emerson
July 01 2010 - 4:46AM
Dow Jones News
Swiss engineering giant ABB Ltd. (ABB) Thursday dropped out of
the bidding for Chloride Group PLC (CHLD.LN), clearing the way for
Emerson Electric Co. (EMR) of the U.S. to acquire the U.K.
industrial company for about GBP1 billion.
The decision by ABB to walk away from a bidding war shows that
it isn't prepared to overpay for acquisitions, even though it has
money to spend.
"While we still see considerable value in the combination of ABB
and Chloride and have a high regard for the Chloride management
team, we must take a disciplined approach when assessing potential
acquisitions," ABB Chief Executive Officer Joe Hogan said.
ABB, which had a war chest of $5 billion in cash, has been on a
buying spree in recent weeks. It has spent more than $1 billion to
buy Ventyx, an energy industry software company, and about $965
million to raise its stake in Indian subsidiary ABB Ltd. (India)
(500002.BY) to 72% from 52%. It also bought U.S. measurement
product maker K-TEK for an undisclosed price.
Analysts had feared the race for Chloride would result in an
exaggerated takeover price and are relieved by ABB's latest
move.
"ABB has clearly communicated it would be disciplined, but
people were worried anyway. They're now acting in line with what
they have been promising, which is good," Zuercher Kantonalbank
analyst Richard Frei said. "Chloride's customer base would have
been nice to have but they aren't the undisputed leader in all the
markets, and it's not ABB's core business."
Emerson, a power and industrial-automation company, April 26
outlined an indicative proposal to buy Chloride for 275 pence a
share, or GBP723 million, a 34% premium to the U.K. company's
closing price at the time of 209 pence and a 40% premium to its
three-month average closing price. Chloride, which makes systems to
protect customers from power surges or failures, rejected the
offer, which it said significantly undervalued the company.
ABB entered the fray June 8 with a bid to buy Chloride for
GBP890 million, or 325 pence a share. Chloride's board considered
the ABB reasonable and fair and planned to recommend it to
shareholders.
However, St Louis, Missouri-based Emerson returned to the table
June 29 with a higher offer. It proposed to buy Chloride for GBP996
million, or 375 pence a share, a 79% premium to the U.K. company's
closing price before its initial approach in April and a 90%
premium to its three-month average closing price.
At the same time, it said Chloride shareholders would be
entitled to the 3.3 pence a share dividend proposed by Chloride for
the year ended March 31, taking the total value to 378.3 pence per
share.
London-based Chloride, which posted pretax profit of GBP29.9
million in fiscal 2010 on revenue of GBP336 million, declared the
Emerson bid superior and agreed to open talks.
Analysts don't expect any more bidders to come forward.
At 0903 GMT, Chloride's shares in London traded down 16 pence,
or 4.2%, at 370 pence. In Zurich, ABB's shares traded down 0.13
Swiss francs, or 0.7%, at CHF18.84.
-By Martin Gelnar, Dow Jones Newswires; +41 43 443 8042;
martin.gelnar@dowjones.com
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