Invensys seen in play despite bid talks ending

Reuters News
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Posted: Jun 21, 2012 7:46 AM
Invensys seen in play despite bid talks ending
By Paul Sandle and Kate HoltonLONDON (Reuters) - A slump in shares of British engineering group Invensys Plc as bid hopes faded did little to dampen the belief of some company watchers that the group was "in play" for the possible disposal of some or all of its businesses.Responding to a report that said Invensys had received an approach from Emerson Electric Co, the UK group confirmed on Thursday it had received a "highly preliminary" approach from the U.S. company but said discussions had ended."Furthermore there are no other discussions taking place in relation to an offer for the group," it said.It also said it had also been in "highly preliminary" talks with third parties about separate parts of the group, but these talks had also ended.Analysts at brokerage Singer Capital Markets said they saw strategic buyers for each division of Invensys, adding the company's hefty pension liabilities should not prove an insurmountable barrier for any buyer."A break-up is likely to generate the highest value for each division, though the group's large pension may prove to be more of a stumbling block than if the group were to be acquired in its entirety by a large conglomerate," Singer analysts said.Shares in Invensys, which closed up 27 percent on Wednesday after a report said it was considering the sale or all or parts of its business to Emerson, were down 16.3 percent at 215.1 pence by 1039 GMT (6.39 a.m. EDT).Morgan Stanley noted that under British takeover rules Emerson was prevented from making another approach for six months unless a third party made a bid.MARKET VALUE"This does not prevent any third party from opening talks in the meantime," the bank said. "This may stop the shares giving up all their gains from yesterday."The group had a market value of 2.09 billion pounds ($3.3 billion) on Wednesday after the stock spiked to a 10-month high.Invensys makes rail signaling, industrial systems for nuclear power stations and oil and gas plants, and controls for domestic appliances. It is smaller than most of its competitors, making it one of a few tradable assets in the global engineering sector.However, its pension liabilities remain a potential hurdle to a deal. Its pension fund had a net deficit of 426 million pounds at the end of March, although its total liabilities were far higher than that, analysts said.Invensys did not name any other parties which could be interested in some or all of its assets, but a report last month said Siemens, ABB and General Electric had also made informal contact.A source close to Invensys said the talks with Emerson had ended some months ago, while some of the interest from third parties was more recent.Analysts at UBS said long-suffering Invensys shareholders would probably want an offer of near 300p per share, allowing an exit at a hefty valuation of 10 times enterprise value over operating profit.($1 = 0.6354 British pounds)(Editing by Mark Potter)