British engineering group Vesuvius has confirmed receiving a £1.37 billion takeover proposal from Austrian competitor RHI Magnesita, driving its shares up 26 per cent in London trading.
The FTSE 250 firm disclosed in a formal statement to shareholders that it would evaluate the cash-and-stock proposal submitted in August. The proposal follows two earlier takeover attempts by Vienna-headquartered RHI Magnesita in March and June, both of which Vesuvius rejected.
Under the terms of the latest proposal, which values Vesuvius at 551p per share, shareholders in the British firm would receive 7.1 million new RHI shares. That equity distribution would give Vesuvius investors a 13 per cent stake in the combined business. Shareholders would also remain entitled to receive a previously announced 7.1p dividend.
The announcement sent Vesuvius shares surging 26 per cent, or 98p, to 472.8p on the London Stock Exchange, while shares in RHI Magnesita fell 15p, or 0.53 per cent. The 551p per share valuation represents a 47 per cent premium over the closing price of Vesuvius shares on Monday.
Heat-Resistant Materials and Industrial Operations
Both companies specialise in manufacturing heat-resistant refractory materials. Refractory products line industrial furnaces, ladles and containment vessels used in high-temperature heavy manufacturing processes such as steelmaking.
Vesuvius recently flagged that its steel division had lost ground as the business battles rising operational costs along with supply chain issues across its North American operations.
Shareholder Backing and Governance Questions
Activist investment firm Cevian, which holds a 14 per cent stake in Vesuvius, has backed the takeover proposal. Activist investors acquire substantial holdings in public companies to influence strategy and corporate governance.
Responding to Cevian's support, Vesuvius stated: "The company appreciates Cevian’s commitment and engagement during this time and remains focused on the interests of and delivering maximum value for all shareholders."
Russ Mould, investment director at UK investment platform AJ Bell, questioned why Vesuvius had not previously disclosed the takeover approaches to the market.
"RHI first made an approach towards Vesuvius in March, and again in June, before a third attempt in August," Mould said. "This begs the question why this information was not disclosed to shareholders until now. Three approaches in six months shows persistence on RHI’s part."
Wave of Foreign Acquisitions in the UK
If Vesuvius agrees to a deal, it will become the latest London-listed business to fall into foreign hands following a wave of acquisitions by overseas suitors.
A string of London-listed firms has been targeted by foreign predators this year, including financial behemoth Schroders and Lloyd's of London specialist insurer Beazley.
Other major UK businesses targeted by overseas buyers include warehouse owner Segro, budget airline operator easyJet, food ingredients maker Tate and Lyle, and Evoke, the parent company of bookmaker William Hill.
