Pilkington rejects Nippon’s ₤2 billion offer

Pilkington rejects Nippon’s ₤2 billion offer

	Published : Fri, 04 Nov 2005 10:05 By : Paula Demarzio Print this Story

Riding high on the wave of higher than expectations profits, Pilkington, world’s second biggest glass maker, rejected a ₤2 billion takeover bid from its Japanese rival Nippon Steel Glass. The British firm which posted a 22% increase in first half-profits to £99 million said that the offer amounting to 150 pence a share was “materially short”.

Meanwhile, Pilkington was concentrating on its revival strategy. It plans to spend about £200m over the next three years to expanding into India, China, Russia, and the Middle East. It is also reportedly keen to increase its share holding in two joint ventures of Chinese float glass of SYP and China Glass Holdings. In the former, it owns a 20 per cent stake and in China Glass Holdings it is expecting to up its stake from present 9.9 per cent to 29 per cent during a period of six months.

Pilkington managed to reduce its debts considerably after it slashed one-third of its workforce. Its sales in the automotive increased by 15% to £630m.The firm has benefitted as amounts of glass being used in vehicles has increased.

Analysts were divided as to whether the offer made by the Japanese company was at a realistic level. Dresdner Kleinwort Wasserstein thought 170 pence was a fair offer, while Teather and Greenwood valued the company at 180 pence. Morgan Stanley, however, felt that realistic offer was only 122 pence.

Chairman of Pilkington, Sir Nigel Rudd, said: “Although conditions in most of our markets remain challenging, we have continued confidence for the full financial year”. The company’s borrowings stood at £685m, which implies that the company has around £80m a year to disburse for expanding its business.

Presently, Nippon holds a 20% stake in the St Helens-based Pilkington, which was founded in 1826 and has a staff of 24,000. The Japanese company, which is only half Pilkington’s size, is unlikely to review its offer and the latter may continue to operate on its own.

As Darren Shaw of Dresdner Kleinwort Wasserstein puts it: "At this stage we estimate a 75 per cent chance that Pilkington can keep its independence".