Melrose abandons Charter bid
ENGINEERING turnaround specialist Melrose has announced it is to pull out of the bidding for gas and welding group Charter International.
In a statement, the Warwickshire firm said: “In the current climate Melrose is of the view it is not in its shareholders’ best interests to proceed and announces that it will not be making an offer for Charter.”
Charter shareholder Schroder Investment Management said the group’s decision to seek alternatives beyond Melrose was a “victory for short-termism and a defeat for shareholders with a long term investment time horizon deal”.
Melrose first mounted a bid for Charter in June when it saw the potential for adding the company to its portfolio.
The firm had been thought to be the front runner to complete the deal but was usurped following the intervention last month of US-based Colfax Corporation. The Colfax bid is thought to value Charter at £1.5bn.
Melrose had continued with its due diligence and had agreed terms with its banks to allow the deal to proceed.
It had said it believed its bid was an attractive offer which reflected the strength of the Charter business and its growth prospects.
Following the Melrose statement, Schroder Investment Management said: “We are disappointed, though not altogether surprised, that Melrose has had to withdraw its potential offer for Charter.
“As long term shareholders in Charter, we believe there is substantial upside in the company which, in our view, would have been realised over the next 3-5 years under management by Melrose in a UK listed company. We were supportive of the Melrose offer as we never wished to be ‘cashed out’ of the long-term potential of the Charter businesses today, but to be able to participate in the future upside under the terms of the Melrose offer.
“In our view it is disappointing that the opportunity was not taken by the Charter board and its advisors to engage with Melrose and, instead, to solicit alternative approaches – to the extent of paying an inducement fee to their preferred US suitor. They may deem this outcome a satisfactory result for shareholders but we regard it as a victory for short-termism and a defeat for shareholders with a long term investment time horizon.”
