Tomkins backs $4.5 billion Canadian bid

Tue Jul 27, 2010 12:09pm EDT
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By Golnar Motevalli and Quentin Webb

LONDON (Reuters) - Tomkins Plc, the British maker of car parts, industrial hoses and bath tubs, backed a 2.9 billion pound ($4.5 billion) takeover offer from Canadian investors that would be the year's largest leveraged buyout.

Tomkins said a trio of investors owning more than 9 percent had also formally backed the $4.5 billion offer from Onex, Canada's largest private equity firm, and the C$127 billion Canada Pension Plan, the country's second-biggest pension fund.

But the board's recommendation, eight days after Tomkins revealed takeover talks, sparked anger from 2.97 percent shareholder Standard Life Investments, which had already urged investors to reject the approach as too cheap.

SLI Head of UK Equities David Cumming said the deal's pay and bonus agreements gave management "massive incentives" to "deliver returns to private equity rather than to current shareholders." A share scheme could allow Tomkins managers to own up to 15 percent of the new company.

Tomkins Chairman David Newlands said despite the opposition of SLI and a "very small institutional shareholder," he expected wide backing for the deal, which is structured as a scheme of arrangement that requires 75 percent backing.

"The feeling I get from the rest of the shareholders is that we will get a substantial amount of backing," Newlands, told Reuters in a telephone interview, adding that he was first approached by Onex about a deal in late March.

Another top-ten shareholder told Reuters the offer was a reasonable price for a "bog-standard manufacturer" whose Chief Executive, Jim Nicol, had already wrung out possible cost cuts. "It feels fair and it might be more than fair if the economic environment gets worse," this investor said.

Tomkins shares leapt nearly 5.3 percent to trade at their highest since May 2006, and just below the 325 pence-a-share offer price.   Continued...