Elis threat­ens hos­tile takeover of Berend­sen

Financial Times USA - - COMPANIES - MICHAEL STOTHARD — PARIS

French laun­dry ser­vices group Elis is threat­en­ing a hos­tile takeover of UKbased ri­val Berend­sen after the tar­get’s board of di­rec­tors repeatedly re­jected its cash and share of­fers. Elis yes­ter­day said it was tak­ing a new of­fer of 440p in cash and 0.426 new Elis shares for each Berend­sen share straight to share­hold­ers. This val­ued Berend­sen at just over €2bn.

Elis is one of a flurry of for­eign com­pa­nies look­ing to take over UK ri­vals this year as the de­ci­sion to leave the EU has weighed on the pound, mak­ing com­pany val­u­a­tions more at­trac­tive.

Elis said yes­ter­day that com­bin­ing the two com­pa­nies would “cre­ate a strong pan-Euro­pean leader in tex­tile and fa­cil­ity ser­vices”, with the prom­ise of “sig­nif­i­cant” cost re­duc­tions. Berend­sen share­hold­ers would own 35 per cent of the com­bined group. But Berend­sen quickly re­sponded that the of­fer “very sig­nif­i­cantly un­der­val­ues” the com­pany and that the Berend­sen man­age­ment “does not see the ba­sis for any fur­ther dis­cus­sions with Elis”.

Berend­sen has seen two profit warn­ings since Oc­to­ber last year amid op­er­a­tional prob­lems in its UK linen busi­ness that has sent shares down as much as 40 per cent.

The man­age­ment is ar­gu­ing that it is fix­ing the prob­lems, and that the 35 per cent pre­mium be­ing of­fered by Elis this week is an at­tempt to buy the com­pany on the cheap.

An­a­lysts said the de­ci­sion by share- hold­ers to ac­cept the Elis deal or not will re­flect their con­fi­dence in the man­age­ment’s own abil­ity to turn round the com­pany.

“Tar­get man­age­ment will no doubt ar­gue that they can pro­duce a stand­alone share price in ex­cess of the bid value, the ques­tion Elis is ask­ing is whether share­hold­ers re­ally be­lieve that,” Olive­tree an­a­lysts said in a note.

Iain Fer­gu­son, chair­man of Berend­sen, urged share­hold­ers not to sup­port the of­fer, say­ing it was “highly op­por­tunis­tic and does not re­flect the in­her-

The of­fer is ‘highly op­por­tunis­tic and does not re­flect the in­her­ent value of our busi­ness’

ent value of our busi­ness”. He added: “The pro­posed com­bi­na­tion would re­sult in sub­stan­tial risk: it in­creases ex­e­cu­tion risk against the ex­ist­ing strat­egy and in­tro­duces ma­te­rial in­te­gra­tion risk.”

Jane Spar­row, an an­a­lyst at Bar­clays, said the ra­tio­nal be­hind the Elis deal was sound: “The pro­posal makes ge­o­graphic sense to us with Berend­sen strong in UK and Scan­di­navia, and Elis strong in France.”

She added that there would be op­por­tu­ni­ties for syn­er­gies in the Benelux re­gion and the op­por­tu­nity to build scale in Ger­many and the deal was “wor­thy of con­sid­er­a­tion” by Berend­sen.

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