Delta, the UK-listed metals company, has recommended a £285m ($428m) takeover offer from Valmont, the US-based producer of fabricated metal products and concrete poles.
Valmont has offered 185p a share for Delta, a 20 per cent premium to its closing price on Wednesday. Shares in the company closed up 37¾p, or by 25 per cent, at 191½p on Thursday.
However, as its shares closed above the offer terms, traders took the view that Valmont would have to increase its offer to secure the support of shareholders, which include Crystal Amber.
The activist investor doubled its holding in Delta to 3.3 per cent on Thursday and said it would not back the offer because of the modest premium and a controversial decision not to pay a dividend.
“To present this as a 185p a share offer is misleading. It is really 180.2p,” said Crystal Amber’s Richard Bernstein.
Delta, which employs 2,5000 people at manufacturing plants in Australia, Asia, South Africa and the US, provides a range of galvanising services to metal product producers, as well as making products ranging from steel road safety barriers to power transmission, lighting and telecommunications poles and chemicals for batteries.
The company, whose shares traded below 70p at the end of 2008, ended last year with net cash of £140m after generating turnover £331m and profits of £37m. It has not published full-year figures for 2009.
Todd Atkinson, chief executive, said he expected the recommended takeover to end three years of restructuring work, which had also seen the company’s search for a potential merger or sale complicated by its pensions liabilities and trading risks for its troubled South African businesses.
He added the company’s position as an independent UK-listed entity was “unsustainable” while the complications of its business combined with fluctuating pension liabilities made it difficult to advance discussions with many potential suitors.
“The cash couldn’t be returned [to shareholders] because of the pensions deficit,” he added.
The scale of Valmont, which has a market capitalisation of $1.9bn, would make it easier to absorb the risks of Delta’s business compared to many other possible bidders, he said.
In a note on Thursday, Liberum brokers said the offer was “hardly generous” compared with valuation multiples enjoyed by its UK peer Hill and Smith though it noted the overhang of pension risk on the business.
Mr Atkinson said Delta, advised on the sale by Rothschild, would be happy to consider any enhanced offer, but said he would “be surprised” if any emerged.
Get alerts on Basic resources when a new story is published