Tomkins Receives $4.5 Billion Buyout Approach

LONDON (Reuters) – Car parts maker Tomkins Plc (TOMK.L) received a $4.5 billion bid approach from a Canadian consortium, the latest example of North American buyers eager to capitalise on sterling weakness to snap up British assets.

Shares in Tomkins soared 33.1 percent to 306.6 pence by 0920 GMT, making the company the biggest riser on Britain’s mid-cap index .FTMC and valuing it at about 2.7 billion pounds ($4.1 billion).

The stock hit a 314 pence high, its highest since 2006 but below the 325 pence cash offer from private equity firm Onex Corporation (OCX.TO) and the Canada Pension Plan Investment Board.

Tomkins said on Monday it had opened its books to the consortium and that due diligence was at an advanced stage.

Tomkins said the bidders reserved the right to reduce their offer price in the event that the company’s board agrees.

North American suitors have acquired a number of British engineering companies so far in 2010.

Most recently U.S. conglomerate Emerson Electric (EMR.N) acquired power supply systems maker Chloride (CHLD.L), URS Corp (URS.N) bought engineering consultancy Scott Wilson Group (SWG.L) and Valmont Industries (VMI.N) acquired Delta, an industrial engineer.

Tomkins also gave an update on its trading, saying it expected to post adjusted operating profit of $290 million for the first six months of the year, boosted by stronger demand from car makers for power transmission components and systems.

Analyst Xavier Gunner at brokerage Arbuthnot said he expected consensus earning estimates to rise as the company’s first-half operating profit looks ahead of schedule compared with current estimates.

Thomson Reuters I/B/E/S forecasts full-year operating profit of $424 million, according to estimates from nine analysts.

Tomkins trades on 10.6 times estimated earnings, while an offer at 325 pence would value Tomkins at 16.6 times estimated earnings, according to Thomson Reuters StarMine.

Collins Stewart analyst Mark Wilson said Tomkins’ first-half results justified the 325 pence level of the approach and said he wouldn’t be surprised if the company attracted interest from other suitors, both financial and industrial.

But he added: “Given how far down the line this already appears to be anyone else who’s interested in the company, really time is against them.”

Arbuthnot’s Gunner added that Onex owned some major manufacturing businesses and should be seen as a serious player.

Tomkins said it expected sales and margins to be weaker in the second half of 2010 than in the first half due to economic uncertainty.

“Whilst the first half of 2010 has seen strong performance, albeit against a particularly weak comparable period, there are some signs in recent weeks that some of our markets are softening,” the company said in a statement.

Tomkins is being advised by JP Morgan Cazenove.

By Sarah Young
(Editing by Paul Hoskins, David Holmes and Michael Shields)