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A bidding war erupted for First Technology, a UK maker of gas sensors and crash test dummies, after US group Danaher trumped Honeywell with a £251m cash offer.

First Technology had accepted a £207m offer from Honeywell last month. But Fred Westlake, First Technology chairman, said Danaher’s 330p-a-share offer represented not just a substantial premium to Honeywell but “a superior strategic fit” for the business. First Technology shares jumped 27.4 per cent to 351p as the market appeared to expect a further round of counter-offers between the two US corporations.

Both groups are keen to acquire the UK company’s world-leading gas detection products.

It also emerged that Hg Capital, a private equity business, had made an initial approach to First Technology.

Honeywell declined to comment but analysts said the undertakings lined up by Danaher were weak enough to allow Honeywell back into the bidding. Aberforth Partners, with 10 per cent of First Technology shares, has given Danaher a binding undertaking. Danaher also has contractual undertakings from a further 8 per cent of shareholders to sell to the Washington-based handtool maker.

But Morley, with 9.9 per cent of the shares, has given other suitors seven days from the tabling of Danaher’s offer – expected next week – to make a revised offer. It will then back a further Danaher counter-offer if it is at least 5 per cent higher. Meanwhile, Sterling Investment Group, Artemis Investment Management and Jupiter Asset Management, which between them hold 13 per cent of the shares, are pledged to back Honeywell if it matches any competing offer.

Jonathan Hurn, analyst with Bridgewell Securities, said the scene was now set for “two weeks of intense activity, with a competing offer from Honeywell possibly coming as early as next week”. David Larkham, analyst with Arden Partners, said there was achance Honeywell could “pay above the current price, and it won’t be over then.”

First Technology broke banking covenants and issued three successive profit warnings last year. It made a pre-tax loss of £20.6m in the 12 months to October 31 on turnover of £79.1m, after a sharp drop in sales of automotive products.

DrKW is acting as financial adviser for First Technology.

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