Board backs Tomkins takeover despite shareholders’ worries

The car parts to bath tubs manufacturer has ignored complaints that the 325p a share deal undervalues the company.

Today the board formally recommended the offer from Canada's largest private equity company, Pinafore Acquisitions, a vehicle formed by buy-out firm Onex and the Canada Pension Plan Investment Board for the purpose of acquiring Tomkins, Pinafore said Schroders Investment Management and JP Morgan Asset Management had agreed to vote in favour of the acquisition.

They collectively own just over 9% of Tomkins shares.

Tomkins chairman David Newlands said: "The cash offer... fairly reflects both the value of the group today and its future potential."

Analyst Mark Wilson at Collins Stewart disagreed, arguing the bid "doesn't reflect any kind of premium for the fair value of the company", but added it was unlikely anything could now stand in its way.

"The risks of it not happening are pretty slim. The only thing I think could stop it is some sort of counter-bid and that looks very unlikely. And with the largest shareholder giving it backing, it's probably going to go through," Wilson added.

Tomkins said in its statement that the board's recommendation reflected its negative forecast for the company's second-half performance and the fact that the shares were trading at just 230p before news of the consortium's approach.

The group shed thousands of staff after suffering badly amid the recession and a slump in car and housing markets, with its significant US operations taking the brunt.

Pinafore said it will support Tomkins's current strategy of geographic expansion, organic growth in its core US market, and strategic acquisitions.

It added that it believes the next stage of the company's development would be best achieved under private ownership, with long-term oriented shareholders such as Onex and CPPIB.

Seth Mersky, chairman of Pinafore and managing director of Onex, said: "We believe that our offer represents a great reward for Tomkins shareholders and a chance for us to build value over a long investment horizon."

The company started life in 1925 as a maker of buckles and fasteners.

It now employs 25,000 staff and operates in 23 countries.