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Renishaw Targets Expansion in India, Mexico, Spurns Suitors

Renishaw Plc (RSW), whose precision probes were used to inspect the Concorde’s engines, has spurned takeover approaches from several rivals and plans to continue growing alone by expanding in India, China and Brazil.

The British company, whose shares have gained 38 percent this year, is upgrading plants in Pune, India and Sao Paolo and plans to open a subsidiary in Mexico within six months, Chief Executive Officer Ben Taylor said in an interview.

Renishaw’s stock jumped 20 percent on Jan. 26, when the company surprised investors with a four-fold gain in earnings. Demand for probes and instruments used in dentistry, aerospace and defense in countries such as China spurred the gain. Growth has attracted suitors and management had to turn down approaches, taking the view that “the bigger the company, the worse,” Taylor said.

“Every so often a private jet brings in someone who wants to talk,” Taylor said in an interview at the company’s Wotton- under-Edge, western England-based headquarters. “If you named some of the big U.S. multi-billion-dollar companies that have metrology businesses, some of those of course have come.”

Taylor said Renishaw is also “not big on partnerships,” unlike other British manufacturers. Invensys Plc, which signed a partnership accord last year with Chinese trainmaker CSR Corp. to sell its railway software in the local market as well as in southeast Asia, the Middle East and India.

Renishaw, still majority owned by its cofounders, has gained 42 percent this year, making it the seventh best- performer in the 625-member FTSE All-Share Index (ASX), according to Bloomberg data. The shares climbed 4 percent, or 68 pence, to 1,752 pence as of 3:53 p.m. in London, giving a market value of 1.3 billion pounds ($2.1 billion).

Future Placement

The company, which boosted six-month sales by 75 percent, is targeting more than 10 percent growth annually, a pace that could be continued for a number of years, Taylor said.

Renishaw rates India, Brazil and Mexico as the most promising developing markets aside from China, now its largest market. It has outgrown its facility in Sao Paulo and will build a larger one to sell precision measuring and calibration equipment to the country’s buoyant aerospace and automotive industries, he added.

“Renishaw should be the classic model for any engineering company and is one of the great British companies in high growth mode,” said Ben Thefaut, an analyst at Arden Partners, who rates the stock as a “core buy” for 2011. “They are more like a private Germany company; they don’t have short-term views on life like others that leaves them so vulnerable to cyclical downturns.”

Takeover Protection

Renishaw’s biggest customers include Hexagon, Nikon Corp. (7731), Yamazaki Co., Rolls-Royce Group Plc (RR/) and more than 20 Chinese companies.

Co-founders Chairman David McMurtry, 71, and Deputy Chairman John Deer, 73, retain 53 percent of the shares between them, according to Bloomberg data. The anchor investors provide protection against takeover attempts, though one option for the company would be a private placement, Taylor said.

“We’re not a target, but I’m not in any way saying that when the time comes that there might not be a placement,” Taylor said. “It could be that David and John think the best thing we can do is place Renishaw somehow with the new owners, rather than make it a free-for-all. They have both indicated a desire to do the right thing for the company, rather than maximize their return.”

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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