Pilkington is facing Japanese takeover

Date: 2 November 2005
Source: Telegraph.co.uk

Date: 2 November 2005

Pilkington, one of the world's largest glassmakers, yesterday joined the growing list of British companies facing foreign takeovers after Japan's Nippon Sheet Glass made an approach thought to value the firm at £2billion.

Both Pilkington and NSG confirmed that "a preliminary approach that may or may not lead to an offer" had been made.NSG specified that the offer would be wholly in cash.

NSG has long been a potential bidder, with Pilkington's shares jumping several times in the past year on speculation that its smaller Japanese rival was about to make a move. NSG has owned 20.6pc of the British glassmaker since October 2001, when the shares were around 100p.

Pilkington was forced to push out an announcement yesterday after the shares shot up in early trading. They closed 26½ higher at 153¼p, a rise of 21pc. Should a bid be made, and NSG said "there can be no assurance" as "discussions are at a very preliminary stage", it is likely to be pitched no higher than 150p a share. At that price NSG would have to pay £1.6billion for the 79.4pc of the equity it does not own. The firm is understood to be seeking a recommendation from the Pilkington board and does not want to go hostile.

The acquisition would be a bold move for NSG, which at £1billion is much smaller than Pilkington. It was not clear which banks would putting up the funds for a bid yesterday, though UBS and Lazards are advising NSG. Pilkington is being advised by Citigroup and JP Morgan.

At 150p the bid would be a premium of just 18pc to Friday's closing price. However, analysts said the shares already had a bid premium built in, having risen 17pc in the past six months.

Analysts said rival bids were unlikely. Pilkington's main European competitors, Saint Gobain and Asahi Glaverbel, face competition concerns. However, US group PPG was named as a possible rival bidder, but NSG's 20.6pc stake clearly puts it in pole position. Private equity firms have shown no interest in Pilkington's building materials peer BPB, which is facing a bid from Saint Gobain

A 150p-a-share bid would also trigger windfalls for several of Pilkington's board members. Sir Nigel Rudd, chairman, has 2.33m shares, which would be valued at £3.5m. Chief executive Stuart Chambers, who has been taking his annual bonus in shares since becoming chief executive three years ago, will qualify for one year's pay at £600,000 in the event of a change of control, on top of his £1.6m worth of shares. He has another 650,000 share options, but 167,000 granted in 1996 are worthless as they are priced at 167p.

Pilkington shares collapsed from around 180p in 1996 to 50p in 2003, amid restructuring to pay off debt and improve cash flow. NSG took its stake in 2001, as part of the reorganisation, by exchanging a share in Pilkington's North American business for 10pc of the company. Later that year, it increased its stake to 20.6pc. NSG is part of the Sumitomo Trading Group, a Japanese conglomerate.
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