Partco reluctant over fine merger

The contretemps between Partco and Finelist has all the makings of a really good spat. The chances of a hostile bid are altogether much slimmer, however, and a formal offer looks set to come out eventually.

There are so many similarities between the two companies that a merger of some sort is a bit of a no-brainer. In one fell swoop, Mr Chris Swan would get his hands on a very large industry player whose shares are looking decidedly cheap after a recent pro fits warning.

At the same time, Partco believes it has a strategy to grow the business, and deliver shareholder value. The company's critics point out, however that a strategy which delivers a profits warning is not really a great strategy for taking the businessforw ard.

That said, its defenders point out that factors which led to the profits warning, most notably the Asian crisis and the strength of sterling, are not unique to Partco. That explains the knock-on effect of its profit warning on Finelist shares, whichare also trading now at a discount.

Partco's position has changed over the past day and a half - having initially denied that an approach was made, or quibbling as to the definition of "approach", it now admits that while it was contacted by Finelist, no offer has been forthcoming.

Perhaps the most interesting aspect of this whole story is how much of it is being played out in public, rather than behind closed doors.

The reasons for this are two-fold. Firstly, there is some question over what Partco is actually worth, and by airing the proposals in public Finelist can see exactly where institutional shareholders stand.

Finelist is believed not to want to pay more than pounds 205million for the company, but at last night's closing price the company is valued at just pounds 170million. Institutional shareholders, including the Prudential, Mercury Asset Management and 3i, who also have stakes in Finelist, might well want a merger for the very considerable cost savings that could be expected to result.

Secondly, it puts the onus on Partco to set out why a combination of the two companies should be against shareholders' interests.

Significantly, Partco's statement yesterday does not categorically rule out the idea of a merger. The statement declares: "If an offer is made, it will receive the full attention of the board who are committed to exploring all opportunities to enhance th e value of shareholders' investment."

Partco's chief executive Mr Philip Wragg was reported yesterday as being incandescent, a description dismissed by the company as inaccurate and irresponsible. Irritated - by all the attention in the media - is a more likely adjective to describe hismood , since he now faces the task of convincing institutional investors that he can steer an independent course that delivers greater value to them than being part of Finelist can.

Analysts believe a fair proposal from Finelist would be well received, but it still looks as though Mr Chris Swan has some work to do if he is to shake off perceptions that Finelist has made enough acquisitions for the moment.

Copyright 1998 Newspaper Publishing PLC
Provided by ProQuest Information and Learning Company. All rights Reserved.