Emerson Electric Co., whose bid for power-equipment maker Chloride Group Plc was topped by ABB Ltd., faces a likely July deadline for deciding whether to sweeten an offer for the company it’s been trying to buy since 2008.
That’s the timetable for a renewed offer according to the U.K.’s merger regulator. Chloride investors have signaled that they expect a new bid by sending the stock up 7.1 percent more than the 325 pence a share for which ABB agreed to buy the London-based maker of gear that protects against power outages.
“The market is behaving as if it expects another bid or that this isn’t over yet,” said Eli Lustgarten, an analyst with Longbow Securities in Independence, Ohio, who recommends buying Emerson stock.
Emerson Chief Executive Officer David Farr, 55, is weighing whether to top Zurich-based ABB’s 864 million-pound ($1.3 billion) offer after proposing 275 pence, or 723 million pounds, on April 26. When ABB agreed to buy Chloride on June 8, Emerson said it was reviewing its next step and declined today to comment further.
Farr said in April that acquiring Chloride would help Emerson compete with Schneider Electric SA and Eaton Corp. in the market for uninterruptible power-supply gear. Emerson completed the purchase of Avocent Corp., a maker of information-technology management products, for $1.2 billion last year.
Setting the Deadline
Under U.K. takeover panel guidelines, Farr would typically have to make a move 10 days before Chloride shareholders vote on ABB’s bid. Chloride has tentatively set the vote for July 16. Once Chloride confirms a date, the panel will set a deadline for St. Louis-based Emerson to present a formal bid.
“What the panel would ideally want is for Emerson to clarify this sufficiently ahead of the shareholder meeting,” said Robert Adam, a partner with Baker & McKenzie in London who worked at the takeover panel for two years.
ABB is progressing “according to plan,” Wolfram Eberhardt, a spokesman, said in an e-mail. Representatives of Chloride and the U.K. takeover panel declined to comment.
If Emerson argues it doesn’t have sufficient time to prepare a counterbid before the shareholder meeting, the panel may set a deadline that falls after investors vote, yet before a judge’s final approval, according to Adam.
Emerson, a maker of power-control equipment and garbage disposals, gained 17 cents to $47.64 at 4 p.m. in New York Stock Exchange composite trading. ABB rose 66 centimes to 21.39 Swiss francs in Zurich trading while Chloride declined 1.4 pence to 348 pence in London.
Chloride first rebuffed Emerson when it approached the U.K. company in 2008 with an offer of 255 pence a share, again when Emerson raised its bid to 270 pence and most recently in April.
While Emerson has the cash flow to raise its bid, the company must make sure the acquisition strengthens profit, said Matt McCormick, a portfolio manager for Bahl & Gaynor Inc. The Cincinnati-based firm held 1.2 million Emerson shares as of March 31, according to data compiled by Bloomberg.
“We are somewhat agnostic on if they do it,” McCormick said. “But if they do do it, it better be accretive to earnings and not dilutive to the stock.”