It is thought that Nippon made the approach to Pilkingtons board late last week. But any hopes of a deal could yet be scuppered by Pilkingtons £242 million pension deficit and uncertainty over how Nippon, a company half Pilkingtons size, could fund such a sizeable deal.
Pilkington confirmed the approach yesterday morning, sending its shares 21 per cent higher to 153¾p to value the company at £2 billion.
The glass makers directors, chaired by Sir Nigel Rudd, are expected to further discuss Nippons approach at a pre-scheduled board meeting tomorrow. Pilkington is due to report its interim results on Thursday, with some analysts speculating that the company could use the occasion to also unveil an agreed takeover deal.
However, the market was awash with rumours last night that Nippon was preparing to kick off its bid with a low offer of up to 155p, to gauge investor support for a takeover.
Pilkington is considered unlikely to fall for less than 170p a share, valuing its equity at £2.2 billion. In addition, Nippon would also have to absorb about £572 million of debt and address Pilkingtons £242 million net pension deficit on a FRS17 basis. The pension liability could be substantially higher if the company was forced to wind up the scheme and buy pensions for all of its members.
The Pensions Regulator said last night that it would look at Pilkingtons pension deficit if asked to do so by the targets pension trustees.
Nippons relationship to Sumitomo, the giant Japanese trading house, was also unclear. Sumitomo is thought to regard Nippon as a subsidiary, although Nippons share register suggests otherwise. Neither Pilkington nor Nippon would comment beyond confirming the takeover approach.